Why a slew of completed Singapore homes bodes well for Court Asia

There'll be one new store per year.

According to CIMB, the main growth catalyst in Courts Asia Singapore is accelerated housing completions these three years. 

CIMB noted that since the 2011 elections, the ruling party has gone about resolving the shortage of public housing, starting an intensive building programme. It is no surprise that there will be record public housing completions the next three years.

Here's more:

Singapore’s completed housing units (private and public) will rise from an average of 20k-25k p.a. (2009-2012) to 40.4k–53.6k p.a. the next two years. 4Q12 Public Housing Data backs this, saying that ‘a large supply of 110,000 new residential public housing units will be completed over the coming years’and the government will ‘keep up the pace of new flat supply into 2013’. 

Longer-term, the underlying growth driver is the planned population increase from 5.1m to 6.9m. Although Singapore is a mature market, we think that Courts is well-placed to benefit from this favourable macro trends of increased housing starts.

We believe Courts can sustain its 9M3/12 SSSG of 8%. The increase in SSSG from just 5.1% in FY10 to 12% at end-FY12 is a sign that macro tailwinds are translating into tangible benefits. In 9MFY3/13, SSSG came in at 8% and we think this is sustainable. To capitalise on this growth and to protect its market leadership, management plans to open one new store per year.

Depending on the store format, and we think it is likely to be in the range of 15,000 sf to 30,000 sf, annual retail space increase in Singapore will increase by 4-8%based on the company’s current total retail space of 399,903 sf.

Management has delivered on expectations so far despite the challenge of securing prime retail locations at desired rentals. FY3/13 saw one new store open in Buona Vista in 3QFY3/13.

Two new stores are slated to be open in 2HFY3/14 (Jem, 21,000sf; Westgate 14,000sf) in the densely-populated Jurong.

We think Courts’ market leadership and recognised brand name make it a preferred tenant for retail mall landlords. Rentals average at 5.1% of sales for FY3/10-12.