Real estate has had its ups and downs over the past several years, but there is something to be said for being able to receive cash flow every month – especially from commercial property which in general, has higher returns and occupancy rates than residential real estate.
Singapore, the smallest country in the ASEAN region, had a rough time in 2015 with property values sliding downhill. However, the lack of space on the island along with its business-friendly policies, wealth (one in six households in Singapore are millionaires), and strategic location bode well for its fundamentals in the long term.
Singapore House Prices Down, Long Term Fundamentals Remain
With the prediction that the global population will hit 9 billion in just 20 years, which is more than a 25% increase from the current population, there is little uncertainty real estate prices will go up in small, wealthy city-states such as Singapore, Monaco, and Hong Kong.
In Singapore specifically, it is just a matter of when. The nation is now facing a decrease in property prices but with sales surging to a two year high in 2015, demand may be on an upward trend. Land supply in the city state is not a hard thing to beat as Singapore itself has very limited land.
With the current fall in real estate values, share prices of many property investment and development companies in Singapore have dropped and InvestAsian believes some of them to be undervalued.
Sinarmas Land: A Global Real Estate Firm
Originating from Singapore, Sinarmas Land (SGX:A26) is engaged in the property business through its operations in Indonesia, China, Malaysia, and Singapore. The firm has long-term investments in major commercial buildings, hotels and resorts, along with property development and leasing.
With the aim of becoming Southeast Asia’s leading property developer and 40 years of experience in the field, Sinarmas Land Ltd has the knowledge and the ambitions to capture the growth potential in ASEAN.
A Top Performer in the Singapore Property Sector
In terms of financial fundamentals, Sinarmas Land boasts a secure structure on its balance sheet. With a current ratio of 3, well above the industry average, and an approximately equal proportion of liabilities and equities, the company is in no danger of going into default and is in a great place for further growth.
Its financial performance is also well above the industry norm. With a gross margin 71.29% and net profit margin of 52%, the company has done well and rewarding its shareholders accordingly. Sinarmas has a P/E of barely over 6 and has superb cash flow despite the Singapore property market as a whole.
Currently being sold at 0.38 SGD per share, a shadow of its former self which peaked at more than 0.8 SGD just 8 months back, it is now a very strong buy. With its strong fundamentals and exceptional financial performance, InvestAsian has no reasons not to believe that it will gain back its loss and then some.