In This Article:
Wheelock Properties (Singapore) Limited (SGX:M35), a S$2.20B small-cap, is a real estate company operating in an industry which displays attractive investment characteristics relative to other sectors, especially over time. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year . Below, I will examine the sector growth prospects, as well as evaluate whether Wheelock Properties (Singapore) is lagging or leading in the industry. See our latest analysis for Wheelock Properties (Singapore)
What’s the catalyst for Wheelock Properties (Singapore)’s sector growth?
Not every category of real estate is likely to be impacted the same by macroeconomic factors such as interest rate hikes, and not all locations are primed to grow. So, investors must remain cautiously optimistic and analyse the fundamentals of the underlying industry. Over the past year, the industry saw growth of 6.88%, though still underperforming the wider Singapore stock market. Wheelock Properties (Singapore) is neither a lagger nor a leader, and has been growing in-line with its industry peers at around 6.88% in the prior year. However, analysts are expecting the company to accelerate ahead of its peers over the next year, and deliver a 18.68% growth next year.
Is Wheelock Properties (Singapore) and the sector relatively cheap?
Real estate companies are typically trading at a PE of 12.31x, relatively similar to the rest of the Singapore stock market PE of 14.02x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 6.66% on equities compared to the market’s 7.99%. On the stock-level, Wheelock Properties (Singapore) is trading at a higher PE ratio of 27.9x, making it more expensive than the average real estate stock. In terms of returns, Wheelock Properties (Singapore) generated 2.55% in the past year, which is 4.12% below the real estate sector.
Next Steps:
Wheelock Properties (Singapore)’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Wheelock Properties (Singapore) has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other real estate companies. However, before you make a decision on the stock, I suggest you look at Wheelock Properties (Singapore)’s fundamentals in order to build a holistic investment thesis.