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Which Blue-Chip Property Developer Is The Cheapest Now?

Property stocks took a beating in July when the Singapore government implemented additional property cooling measures. Since then, private condominium prices have declined for two straight months, and analysts expect further corrections in the months ahead.

That said, I still believe the long-term prospects of property in Singapore remains sound. The Monetary Authority of Singapore has said that it wants property prices to rise reasonably and in tandem with wage increases. As such, over the much longer time frame, property prices should increase as wages rise in Singapore.

With property stocks trading some way off their peak, now may be a good time to look for bargains. Here’s a quick look at how the three blue-chip property stocks are valued now.

Price-to-book ratio

The price-to-book ratio is a comparison between the price of a stock and its book value per share. In theory, a stock that is trading at a discount to its book value can pose good value. If a company liquidates its assets and returns the cash to shareholders, investors stand to gain from the price-book value mismatch.

The three property stocks that are part of the Straits Times Index (SGX: ^STI)UOL Group Limited (SGX: U14), CapitaLand Limited (SGX: C31) and City Developments Limited (SGX: C09) – each trade below their book values. The table below shows the price-to-book ratios of the three companies right now.

Source: Author’s compilation and computation of data from Morningstar

As you can see, all three property stocks are trading well below their book values and also below their five-year average. On average, they are selling at a 21.8% discount to their respective averages, with City Developments currently trading at the biggest discount compared to its past.

UOL, however, has the lowest price-to-book ratio currently.

The Foolish bottom line

Clearly, the market does not seem to like Singapore property stocks right now. There is minimal visibility on how the property market in Singapore will move over the next few quarters, and the government has shown that it is not afraid to step in to cool the market if optimism goes out of hand.

However, over the longer time frame, properties in Singapore are most likely going to appreciate as population and wages grow. The long-term fundamentals are intact for these three companies that own, manage and develop properties in Singapore and regionally. With prices well below their historical average, now may be an opportune time to get in cheap.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Jeremy Chia doesn’t own shares in any companies mentioned.