Property developers are on an M&A high: CIMB

It's becoming a ''structural theme''.

According to CIMB, M&A activities are on the rise and are becoming a structural theme for the property sector. Developers are finding the M&A route as a more viable growth path as land prices remain inflated and stocks trade at discounts to RNAV.

Since the F&N saga in 2012, there have been more M&A activities – SC Global being taken private, UE’s acquisition of WBL and most recently, UOL’s delisting proposal for PPAC.

Here's more from CIMB:

We expect more M&A activities to follow in the near- to mid-term, particularly for the small-mid caps. Candidates include Wing Tai, Ho Bee and SingLand. Demand for yield and hard assets continues to be strong.

Developers with more mature investment properties remain in a sweet spot to crystallise asset values via divestments and/or recycling into a REIT.

OUE has announced that it will launch one soon, with Mandarin Orchard and Gallery as the initial portfolio. Other potential sales in 2013 include F&N’s Changi Point to FCT, CMA’s Star Vista to CMT, KepLand’s MBFC Ph3 into Keppel REIT and GLP’s Japan portfolio into its GLP J-REIT.

Part of the capital recycled could be redistributed to shareholders and drive developer stock prices.

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