Are Singapore residential developer stocks the worst in ASEAN?

These stocks are now officially the region’s cheapest.

Here’s another heavy blow to the country’s struggling residential sector. The country’s residential developer stocks have been officially named as the region’s cheapest, after seeing the worst downgrade in price-to-book valuation in the region since 2009.

According to Nomura, in relation to other developers in ASEAN, valuations among the Singapore developers have de-rated the most over the past 10 years. This valuation downgrade corresponded with the poorest showing in terms of ROE generation amongst ASEAN peers.

“The three biggest listed residential developers in Singapore – CapitaLand, City Developments and Keppel Land – were amongst the worst in ASEAN in terms of valuation downgrade over the past 10 years. CAPL, CIT and KPLD were ranked in the 30th, 50th and 20th percentile, respectively, in terms of P/B valuation in ASEAN in 2009 and have since dropped to the 10th, 20th and bottom percentile, respectively, in 2014,” Nomura stated in a report.

However, a silver lining exists for shareholders of local residential developer stocks. “While the bulk of this [de-rating] is driven by relatively weak ROE performance, we think the potential ROE turnaround for SG developers such as CAPL in FY14-16F could offer superior risk-reward to investors,” the report added.