Singapore has officially entered a technical recession and might have a real recession next year. Property developers are already delaying any launching of existing projects and the recent earnings showed that their net profit margin was down as compared to the same period last year. The demand for private properties has dipped also based on a recent survey. Even though the price of property stocks like CityDev, Capitaland and Kepland have already fallen like 50% from their peak value, there could be more downside if projection for next year fall further.
A look at the valuation of CityDev, Capitaland and Kepland for the period since 2001 till now :-
CityDev :-
current value = 1.13x NAV FY07 ( price = $6.45 as of 7th Nov 08, NAV = $5.72 FY07 )
SARS (02/03 ) = 0.61x NAV FY03
dot.com bubble & 911 ( 01 ) = 0.70x NAV FY01
Capitaland :-
current valuation = 0.90x NAV FY07 ( price = $3.17 as of 7th Nov 08, NAV = $3.52 FY07 )
SARS ( 02/03 ) = 0.46x NAV FY03
dot.com bubble & 911 ( 01 ) = 0.55x NAV
Kepland :-
current valuation = 0.65x NAV FY07 ( price = $3.07 as of 7th Nov 08, NAV = $3.18 FY07 )
SARS ( 02/03 ) = 0.48x NAV FY03
dot.com bubble & 911 ( 01 ) = 0.55x NAV FY01
Based on the past reference, at current price for the 3 local developers there seem to have more downside to come especially their earnings will be projected downwards next year. The bottoming of property market might be in 2 years time and prices could reach estimated around 0.50x NAV FY07 and that could relate to CityDev at $2.86, Capitaland at $1.76 and Kepland at $1.59. Hence any purchase at current price level might not have a good margin of safety.
