STI Developers (HK Land, CapitaLand, GLP, CDL, UOL) average 23% YTD Gain

The STI’s five Real Estate Developer & Operator stocks are Hongkong Land Holdings, CapitaLand, Global Logistic Properties, City Developments and UOL Group. Together the five stocks have averaged a 23% total return in the 2017 YTD.
The majority of these returns occurred earlier in the year, amidst the global rotation from Emerging Markets to Developing Markets, and the Singapore Government announcing the easing of property market cooling measures on 10 March.
Last week Global Logistic Properties reported its FY2017 earnings, while City Developments and UOL Group reported quarterly earnings the preceding week. Global Logistic Properties reported a 10% increase in earnings (PATMI) for the financial year ended 31 March 2017, which was also a record for the firm.

The Straits Times Index (STI) includes five Real Estate Developer & Operator stocks which make up 15% of the STI weights. The five stocks are Hongkong Land Holdings, CapitaLand, Global Logistic Properties (“GLP”), City Developments and UOL Group. The five stocks span businesses focused on local, regional and international property development and management.

These five stocks have averaged a 23% total return in the 2017 year to date.

These five stocks also make up just over half the weight of the SGX Real Estate Developers & Operators Index. The SGX Real Estate Developers & Operators Index, generated a total return of 18% in the year to date, outperforming the STI’s total return of 13%.

STI’s Real Estate Developers & Operators 2017 YTD Total Returns (%)

Source: SGX, Bloomberg & SGX StockFacts (data as of 19 May 2017). SGX Real Estate Developers & Operators Index (SGXREDO Index) consists of 16 stocks.

The STI’s five Real Estate Developers & Operators have also made up as much as 11% of the daily stock market turnover over the preceding four months.

Recent Events

Narrowing valuation gap between Developers and REITs - Cyclical growth outlooks, interest rates and risk appetite for property have made sectoral impacts at home and across the region. The past year has seen the Real Estate Developers & Operators segment outperform the Real Estate Investment Trust (REIT) segment and a narrowing of the valuation gap, as gauged by average price-to-book (P/B) of the two segments. At present levels, the Real Estate Developers & Operators average P/B ratio remains below the long term five year average.

Soft landing in Singapore residential market post cooling measures – The majority of these strong returns of the five Real Estate Developers & Operators occurred earlier in the year, amidst the global rotation from Emerging Markets to Developing Markets and the Singapore Government announcing the easing of property market cooling measures on 10 March. These measures had been in place since 2013 which has coincided with Singapore’s private residential market recording 14 consecutive quarters of price declines, the longest decline since 2004. Click here for more details on the easing measures.

Recent earnings highlights - One of the five Real Estate Developers & Operators, GLP, reported its FY2017 earnings last week. City Developments and UOL Group both reported quarterly earnings the preceding week. GLP reported a 10% increase in earnings (PATMI) for the financial year ended 31 March 2017, which was also a record for the firm. Meanwhile, the number of GLP shares held by New York-based hedge fund Elliott Management Corporation crossed over into substantial shareholder territory. On 15 May, Paul Singer’s firm acquired 5.8 million shares, purchased at an average price of S$2.90 per share, which increased its total holdings in GLP from 4.98% to 5.10%.

For a comprehensive guide to Singapore’s Real Estate Sector click here.

SGX Real Estate Developers & Operators Index

The SGX Real Estate Developers & Operators Index is a free-float market capitalisation weighted index that includes the five aforementioned stocks, in addition to another 11 Real Estate Developer & Operator stocks listed on Singapore Exchange (SGX). The 16 constituents of the index maintain a combined market capitalisation of S$81 billion.

The five best performing stocks of the Index in the 2017 year to date, include GLP and City Developments, in addition to non-STI stocks Yanlord Land, Centurion Corp and Wheelock Properties. The 16 constituents are tabled below.

Name	SGX Code	Market Cap S$b	Total Return YTD %	Total Return 1 Yr %	P/B	Dvd Ind Yld %
Hongkong Land Hldgs	H78	24.7	17.0	28.7	0.6	2.5
CapitaLand	C31	15.0	20.1	22.5	0.8	2.8
Global Logistic Properties	MC0	13.7	33.2	63.8	1.1	2.1
City Developments	C09	9.5	27.4	31.9	1.0	0.8
UOL Grp	U14	5.5	16.9	24.8	0.7	2.2
Yanlord Land Grp	Z25	3.6	43.5	61.2	0.9	2.3
Wheelock Properties	M35	2.1	20.8	22.5	0.7	3.5
Ho Bee Land	H13	1.5	17.2	10.1	0.5	2.6
Perennial Real Estate Hldgs	40S	1.4	8.6	-5.0	0.5	0.5
Wing Tai Hldgs	W05	1.4	15.7	11.9	0.5	1.6
Yoma Strategic Hldgs	Z59	1.0	-3.4	10.2	1.5	0.4
Rowsley	A50	0.4	-30.1	-35.8	1.0	N/A
Ying Li Intl Real Estate	5DM	0.3	-12.1	-6.4	0.4	N/A
Centurion Corp	OU8	0.3	38.0	24.9	0.8	4.5
LHN	41O	0.1	14.3	73.1	1.1	2.1
HLH Grp	H27	0.1	0.0	66.7	0.5	N/A
Average			14.2	25.3	0.8	2.1

Source: SGX, Bloomberg & SGX StockFacts (data as of 19 May 2017)

Long-term Sector Growth

Singapore’s largest Real Estate Developers & Operators have a proven track record over past property trends and broader economic cycles. The five Developer & Operator stocks included in the STI have diverse foundations that span three centuries, from Hongkong Land Holding’s beginnings in 1889 to GLP’s portfolio formation before listing in 2010.

Three of the five stocks - Hongkong Land Holdings, CapitaLand and Global Logistic Properties are now amongst the STI’s 10 largest weightings.

STI Real Estate Developer & Operator Foundations

Singapore Real Estate Sector Growth

Source: SGX, Bloomberg & SGX StockFacts (data as of 30 April 2017).

Over the past 20 years, the market capitalisation of Singapore’s Real Estate Sector has grown five times to almost S$190 billion, with three times as many stocks now making up the Sector. During this period the REIT Sector has been established in Singapore, leveraging of the stable returns generated in the preceding years by the Real Estate Developers and Operators.

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