Top bid for landed site at Serangoon Garden Way. A subsidiary of City Developments (CDL), Sunmaster Holdings, was part of a joint-venture that put in the top tender for a 99-year landed residential site at Serangoon Garden Way. The site has an area of 28,401.5 sqm and can accommodate 80-90 terrace houses, each up to two storeys high. CDL is expected to launch sales in 2012.
Nestled in an established landed housing estate. The site is nestled between the Central Expressway (CTE) and an established landed housing estate at Serangoon Gardens. It is accessible to the CTE and Ang Mo Kio Ave 3, and is a short drive from MRT stations at Lorong Chuan and Ang Mo Kio. The site is also close to retail and recreational facilities at the Nex Shopping Mall, Chomp Chomp and Bishan Park.
Accrete 1.5 cents to RNAV. In our model, we assume a land-to-saleable area efficiency of 60% and an all-in development cost of S$305 psf saleable area. In 1H11, we found three transactions of comparable 99-year leasehold terrace homes at Chuan Dr/Link done at S$850-S$950 psf. Since these homes are eight to ten years old, we adjust our average selling price (ASP) assumption for CDL's project up to S$1,050 psf. Using a WACC of 7.5% and assuming straight-line profit recognition from 2012-14, this acquisition would accrete 1.5 S-cents to our RNAV and 1.0 S-cent to our FV estimate (at a 20% discount to RNAV).
Good chance for healthy take-up. Despite an uncertain residential market and this project's considerable size, we see a good likelihood of a healthy take-up at launch. From Jan 11 to Jul 11, there were 1,164 caveats for terrace homes island-wide, of which 226 were in district 19 alone (Serangoon Garden, Hougang, Ponggol). Even in the darkest months of the last crisis (4Q08 to 1Q09), we saw 103 such caveats in district 19 - an indication of
robust demand for terrace homes in that locality. We revise our fair value estimate to S$11.15 (20% discount to RNAV) versus S$11.16 previously, with the boost from this project offset by a marginal decline in market value of MLC shares. Maintain HOLD.
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