Dec 1, 2011

Malaysia Property Stocks Review

Current Malaysia property demand trends

Demand  appears  resilient  for  now.  We  attended  Star  Property  Fair 2011 over the weekend and were pleasantly surprised by the crowd. On a broader perspective, we reiterate our Neutral stance on the sector in anticipation  of  slower  property  sales  growth  going  forward  as  we believe  that  the  property  cycle  is  peaking.  We,  however,  expect  the pricing/demand for prime-located or LRT/MRT-themed property projects
to stay strong.  

Investor-dominated  crowd.  The  considerable  crowd  at  the  property fair  was  a  pleasant  surprise  to  us.  This  was  despite  the school/public holidays  and  uncertainties  permeating  the  global  economy.  Visitors were  mostly  locals  and  above  30-years  old.  From  our  observations/ discussions  with sales personnel and agents, most visitors are buying/ looking for investment properties. In our view, this group would be thus sensitive to any potential stricter policies by BNM/government. 

Shifting demand towards connectivity. We observed strong demand for  properties  with  LRT/MRT  stations  in  their  vicinity.  Such  projects enjoyed  strong  take-ups  and/or record prices. Encorp‟s  The  Strand  @ Kota  Damansara  was  fully  sold  in  less  than  3  weeks  (retail  +  service apartments;  non-bumi  lots;  non-developer  interest  bearing  scheme; RM720-770psf; 640-2,500sqf; launched in early Nov‟11) while Sunway Velocity (900-1,600sqf) achieved 70% take-up despite being offered at RM950psf record price vis-a-vis the area. The next “hot” project, which attracted  considerable  interest  at  the  fair,  is  IOI  Properties‟  SkyPOD Puchong project supported by the new STAR LRT station nearby.  

Bite-sized  projects:  “Small” but “sexy” in  absolute  pricing.  We detect a growing demand trend for “affordable” homes. This has led to the proliferation of the „shoe-box‟ unit concept in the Klang Valley. This refers to properties being sold at relatively high psf prices but  decently ranged  on  a  size  basis  i.e.  RM400-800k  due  to  smaller  floor  area. Despite a RM800psf ASP, OSK Properties‟ 392 units SoFo (priced from RM390k/unit  onwards;  488-1,000  sqf)  at  the  Atria  redevelopment project  was  fully  sold  in  a  day.  The  success  could  also  be  due  to  the lack of new supply at the matured Damansara Jaya area. The “leftover” of hot projects are usually big size units (more than 1,500sqf/unit) with pricing at above RM1m, in our observation.

Locally  driven  demand.  Based  on  our  discussion  with  property developers  and  agents  on  site,  recent  demand  for  property  has  been driven by locals. Foreign buying has mostly been focused on high end properties  and  the  prime  KLCC  area  (which  is  a  familiar  location  to them). Moreover, the recent property launches (like bite-sized units) are more targeted towards the local population. We expect the current trend to continue given the global economic crisis.

Annual property event by The Star. The 3-day property fair was held at the KL Convention Centre from 25-27 Nov‟11. Most listed developers e.g.  SP  Setia,  Mah  Sing,  Sunway,  Ivory,  Glomac,  Encorp  and  Dijaya participated  in  the  event.  Apart from the  popular  “Developer  Interest Bearing Scheme” (DIBS), selected developers also offered attractive 5-14% rebates to property buyers. 

Housing  Minister  guided  for  cautious  2012  growth.  The  Housing and Local Government Minister Datuk Seri Chor Chee Heung said that the  Malaysia‟s  property  sector  is  expected  to  experience  cautious growth  in  2012  during  the  launch  of  Star  Property  Fair  2011.  He expects  the  property  industry  to  register  a  3.4%  YoY  growth  in 2011,
versus 5.1% in 2010 and the downward trend would continue to 2H12.

UEM  Land  (Hold;  RM2.02  TP).    The  largest  developer  in Malaysia  (in  term  of  landbank  and  market  capitalisation)  and land owner in Nusajaya with total remaining landbank of more than  4,068  acres  (73%  in  Nusajaya,  27%  outside  Nusajaya) and  estimated  RM31b  GDV.   Potential  surprises could  come from  more  government  land  developments.  Khazanah  is  the major shareholder, with a 67.5% stake in UEM Land. 

Sevreal Malaysia Property Stocks Reviewed


SP  Setia  (Not  rated)  -  A  versatile  property  developer with a spectrum of mid-to-high end products. SPSB has 3,957 acres undeveloped landbank with an e.RM46b GDV. Next key earnings  drivers  include  its  RM6b  KL  Eco  City, RM10b  Setia City  and  e.RM8b  MOH  Bangsar  project.  In  end-Sep’11, its major  shareholder,  PNB  has  offered  a  conditional  take  over with  RM3.90  offer  price for  SPSB  shares  and  RM0.91  for  its warrants. 

Sunway  (Hold;  RM2.28  TP)  –  One  of  the  leading property  and  construction  groups  in  Malaysia  (new  merged entity  of  Sunway  City  and  Sunway  Holdings).  It  has  RM2.9b outstanding  orderbook  YTD  (construction)  and  RM1.6b unbilled sales as at Sep’11 (property).

Mah  Sing  (Hold;  RM1.76  TP)  -  A  versatile  property developer  with  a  spectrum  of  mid-to-high  end  products. MSGB  is  famous  with  its  fast  turnaround  strategy.    It  has 1,070  acres  remaining  landbank  (Klang  Valley,  Penang  and Johor Bahru) with an estimated RM13b GDV.

Glomac  (Hold;  TP  is  under  review)  -  A  versatile property  developer  with  a  spectrum  of  low-to-high  end products.  Next  key  earnings  catalysts  include  its  90  acres prime-located  Puchong  land  worth  RM1b  GDV.  It  is  our preferred pick for the property sector

by Maybank Investment Bank 30th Nov 2011