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Monday, July 5, 2010

Sector Focus - Property Fighting For A Home

Fighting For A Home
  • Recent launches sold via balloting due to overwhelming response
  • Robust demand even at new benchmark prices
  • Developers’ margins to pick up with higher selling prices & incentive roll-backs
  • Recovery in sales & margins yet to be reflected in share prices.Maintain positive view on Malaysian property sector. Top pick: SP Setia.
Sales going strong at record prices. Huge turnouts seen at property launches over the last three weekends:
  1. Desa Parkcity’s Casaman. All 147units were snapped up within five hours despite record pricing of RM1.7m–RM2.1m/unit for 2/3- storey link houses. More than 650 registrants were present for the balloting exercise, each armed with a bank draft for RM50-100k.
  2. Boustead’s Surian condos at Mutiara Damansara (311 units at RM600psf). 80% sales were achieved after last weekend’s balloting (all non-Bumi units taken up). This was despite the high 50% Bumi quota (vs 30% typically) and large built-up areas of 1679-2443sf, priced at RM926k-1.3m/unit (most of the 850- 1400sf were sold prior to the ballot).
  3. Sime’s Reika link houses at USJ Heights (107 units; RM982k/unit; land size: 24’ x 80’). Achieved 75% take up last weekend, at 19-22% higher ASP vs launch of Kayangan Puteri in Nov09 (RM808-838k).
  4. Desa Parkcity’s Westside One condos (338 units; RM600psf). Approximately 90% of non-Bumi units were booked over just one weekend (built-up area : 969-2066sf).
In Penang, E&O’s Quayside Resort condos (RM685psf, 298 units) reached 65% sales (soft-launched in Oct09) – setting the stage for the launch of its second tower in Singapore soon at ~RM750psf. Later this month, SP Setia will also be conducting a balloting exercise for its Setia EcoPark Phase 8C semi-detached (24 units; RM1.8m/unit vs RM1.2m for Phase 8B launched in end-Oct09).

Positive outlook still not reflected in share prices. Malaysian property sector is trading at 0.74x P/BV (0.56x P/RNAV), still below 0.77x historical mean despite recovery in sales and margins. Malaysian property sector is trailing way behind regional peers in terms of share price recovery post-financial crisis. We remain positive on Malaysian property sector; top pick: SP Setia (sector leader, largest residential developer by sales). We also like E&O, DNP, and Sunrise for their prime landbank, strong brandname and attractive valuation. As for SunCity, its upcoming RM3bn REIT should help unlock value and strengthen its balance sheet.

Analyst
Yee Mei Hui +603 2711 1332
meihui@hwangdbsvickers.com.my
Report from
HWANGDBS Vickers Research Sdn Bhd (128540 U)

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