Prop­erty sec­tor deemed win­ner dur­ing Bud­get 2019

The Star Malaysia - StarBiz - - News -

PETALING JAYA: The var­i­ous prop­erty-re­lated mea­sures an­nounced dur­ing Bud­get 2019 will help to drive prop­erty sales and lower the num­ber of un­sold units for de­vel­op­ers.

May­bank In­vest­ment Bank Re­search (May­bank IB) said in a re­port that the prop­erty sec­tor was a “clear win­ner” last week.

“While we are wait­ing for more de­tails on the ‘prop­erty crowd­fund­ing’ plat­form, we view these cre­ative al­ter­na­tive fi­nanc­ing plat­form as a re-rat­ing cat­a­lyst for the sec­tor over the short term and it should help to boost prop­erty sales and lower the num­ber of un­sold prop­er­ties.

“This is fur­ther sup­ported by the joint ef­fort be­tween the gov­ern­ment and pri­vate de­vel­op­ers via the home own­er­ship cam­paign which will be launched in Jan­uary 2019.”

The re­search house said it is main­tain­ing its earn­ings fore­casts and re­vised net as­set value (RNAV)based tar­get prices.

“We are now tac­ti­cally pos­i­tive on the prop­erty sec­tor (pre­vi­ously neu­tral) for its cri­sis-liked type of val­u­a­tions (which is) a 58% dis­count to our RNAV es­ti­mates. Con­se­quently, we be­lieve the con­cerns on record-high un­sold stocks in the coun­try and a slow­ing gross do­mes­tic prod­uct have been largely priced in.

“We an­tic­i­pate bet­ter sales in the sec­ond half of 2018 (post-elec­tions and zero goods and ser­vices tax in June to Au­gust 2018, as well as ag­gres­sive mar­ket­ing pack­ages by the de­vel­op­ers) and the first half of 2019. We up­grade the prop­erty sec­tor to pos­i­tive.”

Risks to its calls in­clude fail­ures or de­lays in ex­e­cut­ing and im­ple­ment­ing the prop­erty crowd­fund­ing plat­forms, said May­bank IB, in view of the heavy 20% down­pay­ment up­front cost.

The wors­en­ing hous­ing glut and ris­ing com­pe­ti­tion from gov­ern­ment-pri­vate part­ner­ship hous­ing projects also pose po­ten­tial risks, the re­search house said.

“Our top picks are SP Se­tia and UEM Sun­rise. SP Se­tia is look­ing to seal its Bat­tersea Power Sta­tion phase 2 com­mer­cial space sale in Novem­ber or De­cem­ber 2018, while UEM Sun­rise will start reap­ing the fruits from its Aus­tralian projects.

“Earn­ings from both the sold Au­rora and Con­ser­va­tory projects in Mel­bourne will be recog­nised be­tween the third quar­ter of 2018 and first half of 2019. Both SP Se­tia and UEM Sun­rise are on track to meet their sales tar­gets of RM5­bil and RM1.2bil for 2018, re­spec­tively.”

Mean­while, Ke­nanga Re­search pointed out that prop­erty stocks have been bashed down to new lows.

“The KL Prop­erty In­dex re­cently hit a five-year price-low with its year-to-date change at mi­nus 26%, which is far more se­vere than the FBM KLCI’s per­for­mance of mi­nus 3.9% year-to-date.”

Given clar­ity from Bud­get-2019, the re­search house thinks that some re­bounds for the big boys are war­ranted, given the rel­a­tively bet­ter earn­ings sus­tain­abil­ity and less mar­gin risks due to overseas driv­ers or land sales.

“We re­it­er­ate neu­tral on de­vel­op­ers as it will take a while for val­u­a­tions to prop­erly re­cover to his­tor­i­cal mean lev­els even though they are at very low lev­els now which may be capped by the risk of mar­gin com­pres­sions. Real re-rat­ings will only come if we see mar­gin re­cov­er­ies and out­per­for­mance in sales tar­gets.”

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