SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

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<ul>
<li>
Proactive policy, strong property and infrastructure fundamentals have provided beachheads for Singapore’s listed Real Estate stocks.  As many as one in 20 of the stocks representing the Real Estate Sector in the FTSE All World Index are listed in Singapore. 
	 </li>
	<li>
Singapore’s largest capitalised Developers and REITs with a strong Singapore focus have made a firm start to 2019.  The largest capitalised construction stocks have also performed similarly to the Developers over the past two years. 
	 </li>
	<li>
For the Jan MTD, UOL Group led the five largest SG-focused developers with an 8% gain, CapitaLand Commercial Trust led the five largest SG-focused REITs with a 9% gain &amp; Lian Beng Group led the five largest SG-focused Construction stocks with a 10% gain. 
	 </li>
</ul>
Proactive policy combined with strong property and infrastructure fundamentals have provided beachheads for Singapore’s listed Real Estate stocks.  In a real estate forecast jointly published by the Urban Land Institute and PricewaterhouseCoopers - Emerging Trends in Real Estate Asia Pacific 2019 – Singapore’s real estate investment market ranked second in the Asia Pacific region. The strength was due to a large number of major office deals over the preceding 12 months, with domestic investors as the biggest buyers (click <a href="https://www.pwc.com/sg/en/publications/aprealestemerging.html">here</a> for more).

Following the 5 July 2018 cooling measures in addition to broader and global macro headwinds, the URA Residential Property Price Index consolidated on its gains over the first two quarters of 2018. For the first half of 2018, the Index gained 7.5% with 0.4% added to the Index over the last two quarters of 2018.
<figure>
 <img src="https://api2.sgx.com/sites/default/files/2019-01/PPI%20of%20Private%20Residential.PNG" alt="Property Price Index of Private Residential Properties">
 </figure>
 <div class="content-caption">Property Price Index of Private Residential Properties</div>
Singapore has seen multiple cooling measures applied to its housing market since September 2009. As the National Development Minister noted in July 2018, measures are aimed at preventing property bubbles and stabilising the market so prices move in line with income growth and economic fundamentals.

Singapore-Focused Developers, Constructions Stocks &amp; REITs 

<ul>
<li>
The five largest capitalised Real Estate Developers that are both listed in Singapore and reported more than three quarters of their last FY revenue to Singapore include UOL Group, United Industrial Corp, GuocoLand, Bukit Sembawang Estates and OUE. Combined, the five stocks maintain a current market capitalisation of S$14.8 billion. 
	 </li>
	<li>
The five largest capitalised construction businesses that are both listed in Singapore and also reported more than three quarters of their last FY revenue to Singapore include Chip Eng Seng Corp, KSH Holdings, Boustead Projects, Lian Beng Group and Wee Hur Holdings. Combined, the five stocks maintain a current market capitalisation of S$1.4 billion. 
	 </li>
	<li>
The five largest REITs that are both listed in Singapore and predominantly invest in Singapore property assets include CapitaLand Mall Trust, Ascendas REIT, CapitaLand Commercial Trust, Suntec REIT and Mapletree Commercial Trust. Combined, the five trusts maintain a current market capitalisation of S$34.7 billion.</li>
</ul>
With the exception of the five REITs outperforming the Straits Times Index (“STI”) with a marginal gain in 2018, for the time periods below, the three groups of stocks have outperformed the STI when the STI has gained and underperformed the STI when it has declined.  The average total returns of the stocks are illustrated below.
<figure>
 <img src="https://api2.sgx.com/sites/default/files/2019-01/REITS%2CConstruction%2C%20Developers%20Returns%20%283Y%29.PNG" alt="3Y Average Total Returns for REITs, Construction, Developers">
 </figure>
 <div class="content-caption">3Y Average Total Returns for REITs, Construction, Developers</div>
The group of five stocks that saw the biggest swings since the end of 2016 were the Construction stocks, followed by the Developers and then the REITs. On average, over the past 12 months, the swings of the five REITs were around half the size of the swings of the five Construction stocks. 

Current Stock Prices to Net Assets  

The five largest Singapore focused Developers and construction stocks are trading at similar discounts to their five year Price-to-Book (“P/B”) ratio,  while all five REITs are currently trading at P/B ratios above their five year P/B average. Book value is made up of the stock’s tangible assets net of liabilities, and expressed as a function of the shares outstanding. The P/B ratio is used to compare a stock's market value to its book value.

For the Developers, UOL Group currently maintains the P/B at the biggest discount to its five year average, while Bukit Sembawang Estates maintains the narrowest discount. For the Construction stock, KSH Holdings currently maintains the P/B at the biggest discount to its five year average, while Boustead Projects maintains the narrowest discount.

The individual performances of the relevant stocks are tabled below.

<table class="table table-striped"><tbody>
<tr>
<td>
			Stocks
			</td>
			<td>
			Market Cap S$ Bn
			</td>
			<td>
			2017 Total Return %
			</td>
			<td>
			2018 Total Return %
			</td>
			<td>
			2019 Total Return %
			</td>
			<td>
			P/B
			</td>
		</tr>
<tr>
<td colspan="6">
			Five Largest Capitalised REITs with 75%+ Revenue Reported to Singapore
			</td>
		</tr>
<tr>
<td>
			CAPITALAND MALL TRUST
			</td>
			<td>
			8.8
			</td>
			<td>
			19.5
			</td>
			<td>
			12.7
			</td>
			<td>
			5.3
			</td>
			<td>
			1.18
			</td>
		</tr>
<tr>
<td>
			ASCENDAS REAL ESTATE INV TRT
			</td>
			<td>
			8.5
			</td>
			<td>
			27.4
			</td>
			<td>
			0.3
			</td>
			<td>
			5.8
			</td>
			<td>
			1.22
			</td>
		</tr>
<tr>
<td>
			CAPITALAND COMMERCIAL TRUST
			</td>
			<td>
			7.2
			</td>
			<td>
			42.1
			</td>
			<td>
			-5.0
			</td>
			<td>
			9.1
			</td>
			<td>
			1.04
			</td>
		</tr>
<tr>
<td>
			SUNTEC REIT
			</td>
			<td>
			5.2
			</td>
			<td>
			37.6
			</td>
			<td>
			-12.8
			</td>
			<td>
			8.4
			</td>
			<td>
			0.91
			</td>
		</tr>
<tr>
<td>
			MAPLETREE COMMERCIAL TRUST
			</td>
			<td>
			5.1
			</td>
			<td>
			23.0
			</td>
			<td>
			7.6
			</td>
			<td>
			7.9
			</td>
			<td>
			1.20
			</td>
		</tr>
<tr>
<td colspan="6">
			Five Largest Capitalised Developers with 75%+ Revenue Reported to Singapore
			</td>
		</tr>
<tr>
<td>
			UOL GROUP
			</td>
			<td>
			5.6
			</td>
			<td>
			51.2
			</td>
			<td>
			-28.8
			</td>
			<td>
			7.8
			</td>
			<td>
			0.58
			</td>
		</tr>
<tr>
<td>
			UNITED INDUSTRIAL CORP
			</td>
			<td>
			4.2
			</td>
			<td>
			20.6
			</td>
			<td>
			-16.8
			</td>
			<td>
			7.3
			</td>
			<td>
			0.63
			</td>
		</tr>
<tr>
<td>
			GUOCOLAND
			</td>
			<td>
			2.2
			</td>
			<td>
			28.1
			</td>
			<td>
			-16.3
			</td>
			<td>
			2.8
			</td>
			<td>
			0.49
			</td>
		</tr>
<tr>
<td>
			BUKIT SEMBAWANG ESTATES
			</td>
			<td>
			1.5
			</td>
			<td>
			47.1
			</td>
			<td>
			-7.0
			</td>
			<td>
			0.0
			</td>
			<td>
			1.15
			</td>
		</tr>
<tr>
<td>
			OUE
			</td>
			<td>
			1.4
			</td>
			<td>
			8.2
			</td>
			<td>
			-22.2
			</td>
			<td>
			5.6
			</td>
			<td>
			0.34
			</td>
		</tr>
<tr>
<td colspan="6">
			Five Largest Capitalised Construction Stocks with 75%+ Revenue Reported to Singapore
			</td>
		</tr>
<tr>
<td>
			CHIP ENG SENG CORP
			</td>
			<td>
			0.44
			</td>
			<td>
			63.6
			</td>
			<td>
			-29.4
			</td>
			<td>
			6.1
			</td>
			<td>
			0.56
			</td>
		</tr>
<tr>
<td>
			KSH HOLDINGS
			</td>
			<td>
			0.30
			</td>
			<td>
			85.0
			</td>
			<td>
			-32.5
			</td>
			<td>
			4.0
			</td>
			<td>
			0.88
			</td>
		</tr>
<tr>
<td>
			BOUSTEAD PROJECTS
			</td>
			<td>
			0.28
			</td>
			<td>
			22.5
			</td>
			<td>
			-4.2
			</td>
			<td>
			8.5
			</td>
			<td>
			1.03
			</td>
		</tr>
<tr>
<td>
			LIAN BENG GROUP
			</td>
			<td>
			0.25
			</td>
			<td>
			65.8
			</td>
			<td>
			-34.8
			</td>
			<td>
			9.6
			</td>
			<td>
			0.40
			</td>
		</tr>
<tr>
<td>
			WEE HUR HOLDINGS
			</td>
			<td>
			0.19
			</td>
			<td>
			9.4
			</td>
			<td>
			-9.8
			</td>
			<td>
			-2.4
			</td>
			<td>
			0.52
			</td>
		</tr>
</tbody></table>
Source: SGX StockFacts, Bloomberg, Thomson Reuters (Data as of 26 January 2019)

 

Singapore lists more than 150 stocks that represent the Real Estate Developers, REITs and Construction Sectors. The FTSE All-World Index consists of close to 3,200 stocks with 194 stocks representing the Real Estate sector. Of these 194 stocks, 10 are SGX-listed and include Ascendas REIT, CapitaLand, CapitaLand Commercial Trust, CapitaLand Mall Trust, City Developments, Frasers Property, Hongkong Land, Suntec REIT, UOL Group and Wing Tai Holdings.
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Proactive policy, strong property and infrastructure fundamentals have provided beachheads for Singapore’s listed Real Estate stocks.  As many as one in 20 of the stocks representing the Real Estate Sector in the FTSE All World Index are listed in Singapore.  
	 
	
Singapore’s largest capitalised Developers and REITs with a strong Singapore focus have made a firm start to 2019.  The largest capitalised construction stocks have also performed similarly to the Developers over the past two years. 
	 
	
For the Jan MTD, UOL Group led the five largest SG-focused developers with an 8% gain, CapitaLand Commercial Trust led the five largest SG-focused REITs with a 9% gain &amp; Lian Beng Group led the five largest SG-focused Construction stocks with a 10% gain. 
	 

Proactive policy combined with strong property and infrastructure fundamentals have provided beachheads for Singapore’s listed Real Estate stocks.  In a real estate forecast jointly published by the Urban Land Institute and PricewaterhouseCoopers - Emerging Trends in Real Estate Asia Pacific 2019 – Singapore’s real estate investment market ranked second in the Asia Pacific region. The strength was due to a large number of major office deals over the preceding 12 months, with domestic investors as the biggest buyers (click here for more).

Following the 5 July 2018 cooling measures in addition to broader and global macro headwinds, the URA Residential Property Price Index consolidated on its gains over the first two quarters of 2018. For the first half of 2018, the Index gained 7.5% with 0.4% added to the Index over the last two quarters of 2018.

      
    
    Property Price Index of Private Residential Properties
Singapore has seen multiple cooling measures applied to its housing market since September 2009. As the National Development Minister noted in July 2018, measures are aimed at preventing property bubbles and stabilising the market so prices move in line with income growth and economic fundamentals.

Singapore-Focused Developers, Constructions Stocks &amp; REITs 



The five largest capitalised Real Estate Developers that are both listed in Singapore and reported more than three quarters of their last FY revenue to Singapore include UOL Group, United Industrial Corp, GuocoLand, Bukit Sembawang Estates and OUE. Combined, the five stocks maintain a current market capitalisation of S$14.8 billion. 
	 
	
The five largest capitalised construction businesses that are both listed in Singapore and also reported more than three quarters of their last FY revenue to Singapore include Chip Eng Seng Corp, KSH Holdings, Boustead Projects, Lian Beng Group and Wee Hur Holdings. Combined, the five stocks maintain a current market capitalisation of S$1.4 billion. 
	 
	
The five largest REITs that are both listed in Singapore and predominantly invest in Singapore property assets include CapitaLand Mall Trust, Ascendas REIT, CapitaLand Commercial Trust, Suntec REIT and Mapletree Commercial Trust. Combined, the five trusts maintain a current market capitalisation of S$34.7 billion.

With the exception of the five REITs outperforming the Straits Times Index (“STI”) with a marginal gain in 2018, for the time periods below, the three groups of stocks have outperformed the STI when the STI has gained and underperformed the STI when it has declined.  The average total returns of the stocks are illustrated below.

      
    
    3Y Average Total Returns for REITs, Construction, Developers
The group of five stocks that saw the biggest swings since the end of 2016 were the Construction stocks, followed by the Developers and then the REITs. On average, over the past 12 months, the swings of the five REITs were around half the size of the swings of the five Construction stocks. 

Current Stock Prices to Net Assets  

The five largest Singapore focused Developers and construction stocks are trading at similar discounts to their five year Price-to-Book (“P/B”) ratio,  while all five REITs are currently trading at P/B ratios above their five year P/B average. Book value is made up of the stock’s tangible assets net of liabilities, and expressed as a function of the shares outstanding. The P/B ratio is used to compare a stock's market value to its book value.

For the Developers, UOL Group currently maintains the P/B at the biggest discount to its five year average, while Bukit Sembawang Estates maintains the narrowest discount. For the Construction stock, KSH Holdings currently maintains the P/B at the biggest discount to its five year average, while Boustead Projects maintains the narrowest discount.

The individual performances of the relevant stocks are tabled below.




			Stocks
			
			
			Market Cap S$ Bn
			
			
			2017 Total Return %
			
			
			2018 Total Return %
			
			
			2019 Total Return %
			
			
			P/B
			
		


			Five Largest Capitalised REITs with 75%+ Revenue Reported to Singapore
			
		


			CAPITALAND MALL TRUST
			
			
			8.8
			
			
			19.5
			
			
			12.7
			
			
			5.3
			
			
			1.18
			
		


			ASCENDAS REAL ESTATE INV TRT
			
			
			8.5
			
			
			27.4
			
			
			0.3
			
			
			5.8
			
			
			1.22
			
		


			CAPITALAND COMMERCIAL TRUST
			
			
			7.2
			
			
			42.1
			
			
			-5.0
			
			
			9.1
			
			
			1.04
			
		


			SUNTEC REIT
			
			
			5.2
			
			
			37.6
			
			
			-12.8
			
			
			8.4
			
			
			0.91
			
		


			MAPLETREE COMMERCIAL TRUST
			
			
			5.1
			
			
			23.0
			
			
			7.6
			
			
			7.9
			
			
			1.20
			
		


			Five Largest Capitalised Developers with 75%+ Revenue Reported to Singapore
			
		


			UOL GROUP
			
			
			5.6
			
			
			51.2
			
			
			-28.8
			
			
			7.8
			
			
			0.58
			
		


			UNITED INDUSTRIAL CORP
			
			
			4.2
			
			
			20.6
			
			
			-16.8
			
			
			7.3
			
			
			0.63
			
		


			GUOCOLAND
			
			
			2.2
			
			
			28.1
			
			
			-16.3
			
			
			2.8
			
			
			0.49
			
		


			BUKIT SEMBAWANG ESTATES
			
			
			1.5
			
			
			47.1
			
			
			-7.0
			
			
			0.0
			
			
			1.15
			
		


			OUE
			
			
			1.4
			
			
			8.2
			
			
			-22.2
			
			
			5.6
			
			
			0.34
			
		


			Five Largest Capitalised Construction Stocks with 75%+ Revenue Reported to Singapore
			
		


			CHIP ENG SENG CORP
			
			
			0.44
			
			
			63.6
			
			
			-29.4
			
			
			6.1
			
			
			0.56
			
		


			KSH HOLDINGS
			
			
			0.30
			
			
			85.0
			
			
			-32.5
			
			
			4.0
			
			
			0.88
			
		


			BOUSTEAD PROJECTS
			
			
			0.28
			
			
			22.5
			
			
			-4.2
			
			
			8.5
			
			
			1.03
			
		


			LIAN BENG GROUP
			
			
			0.25
			
			
			65.8
			
			
			-34.8
			
			
			9.6
			
			
			0.40
			
		


			WEE HUR HOLDINGS
			
			
			0.19
			
			
			9.4
			
			
			-9.8
			
			
			-2.4
			
			
			0.52
			
		

Source: SGX StockFacts, Bloomberg, Thomson Reuters (Data as of 26 January 2019)

 

Singapore lists more than 150 stocks that represent the Real Estate Developers, REITs and Construction Sectors. The FTSE All-World Index consists of close to 3,200 stocks with 194 stocks representing the Real Estate sector. Of these 194 stocks, 10 are SGX-listed and include Ascendas REIT, CapitaLand, CapitaLand Commercial Trust, CapitaLand Mall Trust, City Developments, Frasers Property, Hongkong Land, Suntec REIT, UOL Group and Wing Tai Holdings.



Early Year Gains of SG-Focused Developers, REITs & Construction Stocks  

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Highlights of SGX-Listed Construction Plays

Singapore

Boustead Projects Limited is a leading provider of innovative real estate solutions with core engineering expertise in the design-and-build and development of smart eco-sustainable business park and industrial developments, and has an international presence across Singapore, China, Malaysia and Vietnam.

Low Keng Huat (Singapore) Limited is a general building contractor and an investment holding company.  Through its subsidiaries, the Company manages projects and hotels, trades construction materials, invests in properties, and provides management services.

Wee Hur Holdings Ltd provides building construction services and acts as the management or main contractor in construction projects for both private and public sectors. The Company's clients from the private sector include property owners and developers, and those from the public sector comprise government bodies and statutory boards.

Civmec Ltd. is an integrated multi-disciplinary construction and heavy engineering services provider to the oil and gas, mining and other industries, such as the infrastructure, utilities, chemical and power industries. The Company provides heavy engineering and other services including fabrication, site civil works, pre-cast concrete and maintenance services.

Soilbuild Construction Group Ltd is involved in in general building and construction.  The Company is principally engaged in building works in Singapore in which they act as the main contractor. In addition, they are also engaged in architectural works in Singapore in which they act as a direct contractor, and project management services.

Hock Lian Seng Holdings Ltd. is a civil engineering firm. The Company carries out civil engineering works for bridges, expressways, tunnels, MRT, port facilities, water and sewage facilities and other infrastructure works.  Hock Lian also procures and sells building materials, namely, concreting sand and aggregates, for building and construction purposes.

PEC Ltd. offers engineering services to the oil and natural gas production, petrochemical, pharmaceutical, and oil and chemical terminal industries.  The Company offers engineering, procurement, construction and/or construction management, and maintenance services.

Nordic Group Limited provides automation systems integration solutions for the marine and offshore oil and gas industries.  The Company also designs and builds tooling systems for customers in the marine, oil and gas, aerospace, medical, and electronic manufacturing services.

Chip Eng Seng Corporation Limited specializes in building construction activities in the private and public sector.  The Company also owns, develops, and invests in properties.

Lum Chang Holdings Limited is an investment holding company whose subsidiaries provide services such as property development and management, building construction, and investment dealing.  The Company also provides home and office improvement services via the Internet for home and office owners.  Lum Chang owns and manages hotels and serviced residences.

TOKYO ENERGY & SYSTEMS INC. designs and constructs thermal, nuclear, and hydro-electric power plant facilities.  The company also builds transformer substation facilities.  Additionally, Tokyo Energy & Systems performs electrical works for telecommunication, air-conditioning, and water supply systems as well as civil engineering works.

Sambu Construction Co., Ltd. specializes in government construction, such as dams, expressways, and subways.  The Company also constructs office buildings, industrial plants, hotels, apartments, schools, shopping malls, museums, and sports facilities.

Zhejiang Reclaim Construction Group Company Limited designs and develops the seawall, reservoir, flood control and other water conservation and hydropower engineering constructions.

Zhejiang Reclaim Construction (002586 CH)

Fudo Tetra Corporation constructs infrastructure such as airports, roads, and dams.  The Company performs ground improvement works.  Fudo Tetra also builds commercial, institutional, and industrial buildings such as skyscrapers, multi-complex parking, and distribution and production facilities. The Company, through its subsidiaries, operates real estate businesses.

Subaru Enterprise Co., Ltd. maintains, cleans, and repairs highways.  The Company also operates movies theaters, restaurants, and other real estate.

Beijing Urban Construction Design & Development Group Co., Ltd. is a construction company that is primarily engaged in rail transit-related design, exploration, and consulting.

Beijing Urban Constn Dsg & Dev Gp (1599 HK)

DL Construction Co., Ltd. provides construction and civil engineering services. The Company offers general outsourcing, public building, housing, landscaping, and other related services. DL Construction offers services throughout South Korea.

ASAHI KOGYOSHA CO., LTD. designs, builds, and maintains air-conditioning and sanitation facilities.  The Company also constructs security, disaster prevention, and electrical facilities in family houses, buildings, and industrial plants.  Additionally, Asahi Kogyosha develops and installs environmental control devices such as clean rooms for high-tech industries.

DAIICHI KENSETSU CORPORATION is a civil engineering company based in Kanto, Shin-Etsu, and Tohoku regions.  The Company constructs railways mainly for East Japan Railway.  Daiichi Kensetsu also constructs infrastructure such as sewage facilities, tunnels, and waterways.  Additionally, the Company builds commercial, institutional, and residential buildings.

GR Engineering Services Ltd is an engineering consulting and contracting company. The Company specializes in providing process engineering design and construction services to the mining and minerals processing industries. GR's services cover all aspects of the project life cycle from the initial evaluation and study phase through to design, construction, commissioning and support.

Lian Beng Group Limited provides building construction and civil engineering services for both the private and public sectors. The Group also sells, leases, and maintains construction machinery and equipment, and develops and invests in properties.

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Lian Beng (LBG SP)

Early Year Gains of SG-Focused Developers, REITs & Construction Stocks

Proactive policy, strong property and infrastructure fundamentals have provided beachheads for Singapore’s listed Real Estate stocks. As many...

Singapore Exchange Ltd (SGX)

Highlights of SGX-Listed Construction Plays

Singapore Exchange Ltd (SGX)

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