SC Global leads Singapore’s luxury property market

Constantly innovating to raise the bar on fine living and achieve record‐breaking selling prices, it offers the purest play on Singapore’s luxury property market. We believe the high replacement cost of $4,700 psf and a tightly‐held supply will continue to support primary market prices in the luxury segment.

The breakeven for 65% of SC Global’s unsold inventory stands at $1,600‐1,900 psf, lower than today’s cost of land in prime Orchard Road. At the current share price, the company is valued at $416m, which is less than the estimated profits from the sale of 30 units at its flagship development, The Marq, which makes up only 15% of its Singapore’s inventory.

Our View
The cost of land in Orchard Road can only go one way, up. The private en bloc market, the sole source of supply, is active only during the peak of the property cycle when consent to a collective sale can be garnered. In the meantime, construction cost has crept up due to higher inflation and labour cost. In short, the high replacement cost of $4,700 psf will support primary market prices. By and large, luxury units are limited in supply.

There are currently 2,379 units held by developers but only 992 units meet our main criterion as truly luxurious, ie, large sprawling units on land over 100,000 sq ft in size, à la bungalows but in the air.

The supply is tightly held by reputable seasoned developers with strong balance sheets; hence, cutting prices to drive sales is very unlikely.

Foreigners are not allowed to own bungalows in Singapore. The next best option is a 6,000‐sq‐ft apartment with full hospitality services, exactly what luxury projects offer. We expect foreigner demand to stay strong, driven by the low interest rates, strong Singapore dollar and the positive long‐term macro outlook – a rapidly growing economy that is rapidly running out of land.

SC Global’s two largest projects, The Marq and Hilltops, make up 65% of its inventory. Their breakeven price of $1,600‐1,900 psf is less than today’s cost of land in the Orchard Road area and significantly below our estimated replacement cost of $4,700 psf. This, together with the ability to fetch a premium for its products, makes SC Global our top pick for the luxury segment.