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Saturday May 11, 2013

‘New dawn’ property sector re-rated


PETALING JAYA: HwangDBS Vickers Research has re-rated the Malaysian property sector, calling it a “new dawn” on the back of upcoming mega initial public offerings, approval for new rail lines and the award of government land projects.

Beneficiaries include SP Setia Bhd, KLCC Real Estate Investment Trust (KLCC REIT), E&O Bhd and YTL Land & Development Bhd. Valuations are expected to be re-rated as sales and landbanking pick up.

Property analyst Yee Mei Hui said that it was business as usual now that the general election was over. There are likely to be no major changes in policies, as Federal and state governments for key markets in Kuala Lumpur, Selangor, Penang and Johor remain status quo. She said that launches should resume and sales should pick up as uncertainty dissipates.

“We upgrade E&O and YTL Land & Development to buy' from hold', and raise target prices across the board by 6% to 63%.

“For big caps, we like laggards like SP Setia, as its Battersea project in the United Kingdom is a game-changer to double earnings, while Malaysian Resources Corp Bhd stands to benefit from PJ Sentral, which could be the next KL Sentral,” Yee said.

“For exposure to Iskandar Malaysia, we see more value in small mid-caps like Crescendo Corp Bhd and Daiman Development Bhd versus UEM Land Holdings Bhd after the recent strong rally.”

She added that there would be potential competition from new bellweather stock IOI Properties Bhd and other Khazanah Nasional Bhd-led vehicles seeking listing, for instance, Iskandar Waterfront Holdings Sdn Bhd, Medini Iskandar or other potential themed attractions.

For the KLCC stapled security, Yee has factored in the potential injection of the Suria mall into the REIT, which will boost her sum of parts by 17%.

Yee said that the mega listings, which range from market capitalisations of RM9bil to RM13bil such as for KLCC REIT, Iskandar Waterfront and IOI Properties (which will be the largest developer by earnings), would help re-rate the sector.

“We are more positive on IOI Properties, given the dearth of sizeable entrepreneurial-driven developers with strong track records and earnings growth.

“The approval of the MRT 2 and 3 lines and the KL-Singapore high speed rail, along with the acceleration in awards of government redevelopment projects such as the Rubber Research Institute of Malaysia land in Sungai Buloh, the financial district of Tun Razak Exchange and Bandar Malaysia in Sungai Besi, should also boost interest in the sector,” noted Yee.

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