Highlights

We hosted our 2014 Property Forum, which was wellattended by more than 40 fund managers. We invited property consultants (Mr Nabeel Hussain, Associate Director of CBRE; Mr Wee Soon Chit, Director of Landserve Johor and Mr Ooi Choon Seong, Director of Landserve Penang respectively) to share their views on KL, Johor and Penang.

KL: Market remains unexciting. We found the speaker’s view largely inline with ours, i.e. affordability remains an issue in Greater KL, and the market is slowing down with less transactions at higher prices. However, the mass market segment continues to do well, as buyers focus on affordability and location.

Johor: Tough situation. The key takeaways were: (1) The landed segment remains resilient, but the outlook is challenging for high rise projects; (2) The entry of the Chinese developers adds to the concerns; (3) The regulatory climate is not helping. Other than the higher RPGT rate and 2% levy on foreign purchases in Johor, there is also talk of the minimum price floor for foreigners being raised from RM1m to RM2m.

Penang: Activity remains healthy, with many developments in Batu Kawan, such as the 6,400 acre Bandar Cassia masterplan development by Penang Development Corporation, and the 831 acre Batu Kawan Industrial Park.

Overall takeaway. We noted that the speaker’s’ views were largely inline with ours, with the key takeaways being issues of housing affordability and near term concerns on supply/demand mismatch, particularly in Johor. We re-iterate our Neutral stance on the sector. Given the situation of elevated house prices and subdued transaction activity, we maintain our view that landed township developers focused on the mass market segment in growth areas will be the outperformers.

Rating

NEUTRAL

Positives: Asset reflation theme remains intact over the longer term; increased opportunities in the affordable/mass market segment; positive demographics.

Negatives: Slowdown in demand for mid/high end segment and economic growth; tighter lending polices by banks.

Top Picks

Tambun Indah (BUY, TP RM2.55) - Offers the purest exposure to Penang mainland. We have recently upgraded our RNAV and TP as our findings suggests it has scope to raise selling prices given that similar projects nearby are selling at 20-40% premium.

Matrix Concepts (BUY, TP RM4.51) - Share price continues to perform well, thanks to strong optimism over its township earnings and high DY (6.8% for FY14).

IOIPG (BUY, TP RM3.78) - Our top big-cap pick; rich in landbank in hotspots such as Southern KL (Puchong, Bangi) and outskirts of Johor with low land costs.

Source: Hong Leong Investment Bank Research - 30 Jun 2014