ECM Libra bullish on residential property

June 2, 2010 |

(The Star, Wednesday, 2 June 2010 – Business & Finance – Page, 5 )

Sustained property sales amid the still-low interest rate and improving sentiments underpin view

Maintain overweight: In line with the recovery seen in the broader market as well as global markets, Bursa Malaysia’s Properties Index ended last week 2.4% higher with all property stocks under its coverage posting gains.

On major shareholding changes, the Employees Provident Fund accumulated 1.2 million shares in S P Setia Bhd as well as 600,000 shares in Sunrise Bhd.

Permodalan Nasional Bhd also picked up 200,000 shares in S P Setia, while Datuk Tong Kooi Ong and DatukYu Kuan Chon each added 100,000 shares in Sunrise and YNH respectively.

MRCB, which has been widely expected to acquire more landbank in KL following its rights issue, may close in on a deal soon costing as much as RM170 million, according to media sources.

Its CEO Mohamed Razeek Hussain has been quoted that a piece of land measuring 0.45ha to 0.9ha, located a stone’s throw away from the Petronas Twin Towers has been identified.

Paramount Corporation Bhd became the latest developer to expand to Cyberjaya as it has acquired a 50.01 acres (20.23ha) of land from Cyberview and Setia Haruman for RM78.4 million cash which will be developed into a RM530 million residential project.

Other developers which have recently expanded into Cyberjaya include Mah Sing Group Bhd and Glomac Bhd. Both developers have done well judging by the encouraging take-up of their recent property launches.

Axis REIT acquired two industrial buildings in the Klang Valley for RM134 million cash. It also plans to undertake a placement of up to 68.8 million new units, representing about 22.4% of the existing units in circulation, at a price to be determined later. We view these acquisitions positively given pre-financing net yields of between 8.1% and 9.5%.

International Real Estate Federation (FIABCI) Malaysia president Datuk Richard Fong has voiced concerns that the government’s move to reduce the number of foreign workers in the country will result in project delays. We share a similar view as constructions workers in’ the country are mostly foreign labours.

The massive exodus of foreign labours in 2002/2003 has resulted in almost a standstill at construction sites, resulting in developers incurring liquidated and ascertained damages (LAD) for late delivery.

We remain bullish on the residential sub-segment of the property sector on the back of sustained property sales amid the still-low interest rate and improving sentiments.

While we like mid-cap property stocks such as Sunway City Bhd and Sunrise due to more compelling valuations, recent market weakness has resulted in S P Setia trading at fairly reasonable valuation. We also like Mah Sing among non-rated property stocks. -ECM Libra Investment Research, June 7

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