SINGAPORE (Feb 20): UOB KayHian remains positive on property stocks and REITs saying the raising of BSD (Buyers Stamp Duty) rate is more of revenue collection than a property cooling measure.
See: Top marginal buyer's stamp duty for residential properties raised to 4%
In a Tuesday report, UOB's Singapore Research Team says the impact on home-buying demand will be marginal with the mass-market segment making up the bulk of the transactions relatively unaffected.
The high-end properties will see a bigger impact with the effective BSD rates rising 0.8-1 ppt, but affordability is a lesser constraint for buyers in this segment.
This is because the new BSD is unchanged for properties priced below $1 million, while those ranging $1 million-$2 million will see up to $10,000 increase in BSD rates.
Instead, tweaks to the proximity housing grant (PHG) is expected to bolster HDB resale prices.
Families buying a resale flat to live with their parents or children will benefit from an increased PHG of $30,000, up from $20,000. For those buying a resale flat near their parents or children, they will continue to receive a PHG of $20,00.
"Maintain 'overweight' on both sectors with City Developments, Wing Tai, CDL Hospitality Trusts, CapitaLand Commercial Trust and Ascendas REIT as our top picks," says UOB.
Meanwhile, the deferment of GST and bonus “hongbao” of $100-300 for every Singaporean aged 21 and above, is expected to provide a boost for the consumer sector and retailers.
See: Singapore delays highly-anticipated GST hike to 9% to between 2021-2025
"Beneficiaries could include Courts, Sheng Siong, Jumbo and FJ Benjamin," says UOB.
Spending on infrastructure continues to be a key focus in Budget 2018.
See: Singapore to inject initial $5 bil into new rail infrastructure fund
The projection for public infrastructure spending has been raised to $20 billion.
Projects over the next decade include the expansion of the rail network, Jurong Lake District, Punggol Digital District, Woodlands North Coast, Changi Airport Terminal 5, Tuas Port and the KL-Singapore High-Speed Rail.
UOB says this is a positive to the construction sector, which has experienced a challenging 2017.
Beneficiaries could include KSH with 87 cents target under review and Hock Lian Seng with 63 cents target.
To be sure, the benchmark Straits Times Index has started the year strongly, up 2.5% YTD and close to UOB's year-end target of 3,530.
"However, we think our STI target could stretch to 3,730 if earnings surprise to the upside," says UOB.
Other stocks UOB favours include those that ride on multi-year growth drivers like Venture, Cityneon, Raffles Medical and CITIC Envirotech; Reflation picks like City Developments, Keppel Corp, Wing Tai; and quality laggards like SingPost, Raffles Medical, ComfortDelGro.
Shares in City Developments and Wing Tai are trading at $12.61 and $2.21 respectively, units in CDL Hospitality Trusts, CapitaLand Commercial Trust and Ascendas REIT are trading at $1.69, $1.76 and $2.60 respectively. Shares in Courts Asia, Sheng Siong, Jumbo and FJ Benjamin are trading at 29 cents, 92 cents and 7.9 cents respectively. Shares in KSH and Hock Lian Seng are trading at 74.5 cents and 50 cents respectively.
