"This slew of initiatives is expected to strengthen trading interest as well as narrow the valuation gap for Singapore-listed stocks, and we think developers are likely to be one of the main beneficiaries," says HSBC's Joy Wang in her Nov 20 note.
She points out that Singapore developers have been out of favour since the Global Financial Crisis, but this is set to change.
"A healthier supply-demand balance and firmer pricing are supporting better development margins," says Wang. In addition, the government’s Draft Master Plan 2025 offers a new wave of redevelopment opportunities that can unlock and create value.
"Meanwhile, dividends are emerging as a stronger feature of their stocks, and some have even introduced a share buyback scheme. The EQDP programme also provides an additional catalyst for investors to revisit undervalued small- and mid-cap names," she adds.
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From Wang's perspective, CDL is one of the largest beneficiaries due to its large commercial portfolio and landbank in Singapore.
Banking on its landbank, CDL now has the largest residential launch pipeline in Singapore, and is well-positioned to take advantage of the next upcycle.
Wang believes this should contribute to earnings growth over the next few years while helping to narrow the valuation gap.
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"We also believe the group can capitalise on redevelopment opportunities for some of its commercial assets.
"Ongoing capital recycling into higher yielding assets and a better dividend payout should further enhance shareholders’ return on top of a heavily discounted valuation – it trades at a 58% discount to its RNAV," says Wang, who has a target price of $11 for this counter.
CDL shares gained 1.52% as at 4.04pm to trade at $7.33. It is up 43.16% year to date.
