UBS positive on property stocks this year

PETALING JAYA: Residential property stocks which underperformed in 2012 will do better this year and among them the best is Mah Sing Bhd, a report by UBS Investment Research said.

It said the Mah Sing was ‘entrepreneurially managed with ambitious plans to grow within Malaysia”.

UBS stated that while 2013 should remain challenging, the company will deliver circa 20% sales and earnings growth based on its diversified range of products.

“Our new price target for Mah Sing’s stock is RM2.80 based on a 30% discount in realisable net asset value (RNAV) of RM3.99 and the company has a dividend policy of paying a minimum 40% of net profit resulting in a forecast yield of 6.2% for 2013,” it said.

The company has announced its record sales target for this year of RM3bil, that is 20% higher than the 2012 and anticipates further landbank acquisitions through financing via a proposed RM400mil rights issue to be completed bt the first half of this year.

Aside from that, UBS is giving a “buy” call for SP Setia whose stock is currently traded at 14.3 times financial year 2013 expected price to earnings with 4.1% yield.

“The stock is currently traded at a 38% discount to our RNAV of RM5.14.

“This discount more than fairly reflects the risks associated with the departure of chief executive officer Tan Sri Liew Kee Sin, diversification of projects outside of Malaysia and upcoming product launches from its high-quality landbank should ensure that the company achieves its aggressive sales target for financial year 2013,” it said.

The share price for SP Setia has fallen almost 20% over the past one year because of the commitment of the company’s CEO and his management team, the upcoming 15% private placement of equity and exclusion from the MSCI index due to lack of liquidity.

The research house said SP Setia’s sales target for this year is RM5.5bil, which is 30% higher than last year, noting that the sales contribution was mainly from its oversea projects sales, specifically from its project in Battersea London.

Meawhile, the research house maintained a “hold” call on the UEM Land Holdings Bhd although it was encouraged by the recent Ascendas joint venture announcement to develop an integrated ecofriendly tech park in Nusanjaya, Johor that is believed to have longterm positive implications for the Iskandar region.

However, it suggested the potential of the Nusanjaya landbank has been a well discussed theme over the last decade and the ability of the company to translate into sustainable earnings stream has so far proven elusive.

UEM Land has not yet announced its target sales for 2013. UBS is expecting the sales contribution to be significantly above the 2012 revised sales of RM2bil in light of launches of new projects in this year that include Angkasa Raya, MK22, Sinaran Hills and Bangi.

The research house pointed out that the high-end property sales in Malaysia were sluggish while the mid- to low- end markets (RM500,00 to RM1mil) sales proved resilient.

Sales of high-end landed property and premium condominiums were weaker.

This was because if the concern about the external environment and the upcoming general election together with the intrduction of the resposible lending guidelines for banks.

“In our view, all the developers will be able to sustain salesmomentum from 2012 into 2013 as they shift to more affordable housing units,” said UBS.

UBS said it expected better global economic data and pick-up in regional equity markets and that once the external picture improved, it said it was likely to result in stronger physical demand from the homebuyers curretly waiting in the sidelines.

UBS expects investors will reconsider putting fresh money into the physical property market after the general election and assuming political stability,