House strategy turns bullish. Back in 28-Mar-13, we had released a sector note (“The stars are aligned for Iskandar developers”) where we positioned developers for an upgrade to OVERWEIGHT while raising CALL/TPs for most of the developers under our coverage, particularly Iskandar Malaysia centric ones. For M-REITs, we maintained NEUTRAL on the sector (29-Mar-13, “Yield compression limits upside”). Back then, we postulated that investors should adopt a “Buy-on-Weakness” strategy for developers, as we expected these stocks to hit floor prices, which were reflective of the 2008-GE scenario; however, none of our floor prices were ever seen as share prices held up well during the GE process. Yesterday, our House turned bullish where the FMBKLCI year-end target has been upgraded to 1830 from 1705, where adopting an overall aggressive strategy involves high-betas (e.g. developers) and sector laggards.
Developers fared surprisingly well during the GE process, including GLC-linked ones like UEMLAND. Over the GE process, developers under our coverage were not sold down heavily, but instead moved up by an average of 1.5%. In fact, developers under our coverage achieved an average YTD gain of 20.9% (range: 7%-47%) vs. the KLPRP’s 14.1% and the FBMKLCI’s 0.3%. This was largely buoyed by priced-in expectations of GE, the resiliency of the Iskandar Malaysia story and market liquidity.
Positive news flows to keep developers buoyant, including; 1) Johor to enjoy the upswing in interest of Iskandar Malaysia properties, Johor-Singapore MRT, IWH’s listing (likely Nov-13), entry of global brands/personality which involves catalytic JVs, more G2G agreements, including a seamless immigration center and increasing FDIs (e.g. O&G plays in Pengerang and Tanjung Piai); 2) Klang Valley to benefit from the KL-Singapore high-speed rail train news (particularly KL), TRX (particularly KL), Circle-Line MRT and RRI land awards.
OVERWEIGHT on developers with higher TPs! Since our House Strategy is to opt for more high-beta stocks, we feel convicted to further upgrade our developer stock CALLs/TPs as it will be ‘business as usual’ since there are no major changes in state governments or the Federal Government. Hence, we lower our overall developers FD RNAV discount from 29% to 23%*. Additionally, we expect overall property demand to pick up in 2H13 as we understand that GE fears could have caused 1) buyers to adopt a “wait-and-see” strategy and 2) developers to delay launches. We have maintained OUTPERFORM but with increased TPs for UEMLAND (TP: RM3.60), IJMLAND (TP: RM2.93), UOA (TP: RM2.60) and Hua Yang (TP: RM2.30). We have upgraded the CALL but maintained TP for MAHSING (OP; TP: RM2.40 – post bonus), while we upgrade both CALLs and TPs for SPSETIA (MP; TP: RM3.80) and Hunza (MP; TP: RM1.70). Our recent initiations remain as OUTPERFORM on Dijaya (TP: RM2.15) and Crescendo (TP: RM3.56).
Still prefer Iskandar-related developers like UEMLAND (2Q13 Top Pick). UEMLAND is the best news-flow proxy to Iskandar and will benefit from the IWH listing. We also highlight that UEMLAND has revised its severely understated project GDVs from RM39b to RM81b! So we do expect the investment community to aggressively revise up their RNAVs which may imply stronger fair values for UEMLAND. In the small-mid cap space, we like Crescendo (OP; unchanged TP: RM3.56) as a pure Johor developer which can offer exposure in the industrial and affordable housing segment. In line with our House strategy, we continue to like IJMLAND (OP; TP: RM2.93) as a laggard sizable developer, which also have catalytic projects in Johor and is in a net cash position.
NEUTRAL on MREIT/Property Investment. We believe investors may want a higher yield as stock return expectations will be more demanding when high-betas are preferred. However, M-REITs (>RM1b market cap) have sizeable institutional shareholders, which have collected at historically low costs. Although we roll-forward valuations to FY14E, we have assumed a slightly higher dividend yield target. As a result, we maintain most of our TPs / CALLs on M-REIT, save for KLCC Property (MP; TP: RM7.00) - TP is raised by 7% to RM7.00 but MARKET PERFORM call remains as we believe yield compression environment is limited. We have MARKET PERFORM on SUNREIT (TP: RM1.61), CMMT (TP: RM1.90) and AXREIT (TP: RM3.66). Among these M-REITs, we prefer SUNREIT (MP; TP: RM1.61) for its aggressive acquisition pipeline which will offer investors more attractive dividend growth compared to the usual organic growth.
Source: Kenanga
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2024-09-01
MAHSING2024-08-31
UEMS2024-08-30
AXREIT2024-08-30
AXREIT2024-08-30
CLMT2024-08-30
CRESNDO2024-08-30
MAHSING2024-08-30
MAHSING2024-08-30
MAHSING2024-08-30
MAHSING2024-08-30
SPSETIA2024-08-30
SPSETIA2024-08-30
SPSETIA2024-08-30
SPSETIA2024-08-30
TROP2024-08-30
TROP2024-08-30
TROP2024-08-29
AXREIT2024-08-29
AXREIT2024-08-29
AXREIT2024-08-29
SPSETIA2024-08-29
SPSETIA2024-08-29
SPSETIA2024-08-29
TROP2024-08-28
AXREIT2024-08-28
SPSETIA2024-08-28
SPSETIA2024-08-28
SPSETIA2024-08-28
SPSETIA2024-08-28
SPSETIA2024-08-28
SPSETIA2024-08-28
SPSETIA2024-08-28
SUNREIT2024-08-28
UOADEV2024-08-28
UOADEV2024-08-27
AXREIT2024-08-27
AXREIT2024-08-27
CLMT2024-08-27
CLMT2024-08-27
SPSETIA2024-08-27
SPSETIA2024-08-27
TROP2024-08-27
TROP2024-08-27
UOADEV2024-08-26
CLMT2024-08-26
CLMT2024-08-26
SPSETIA2024-08-26
SPSETIA2024-08-26
SPSETIA2024-08-26
SUNREIT2024-08-23
AXREIT2024-08-23
CLMT2024-08-23
SPSETIA2024-08-23
SPSETIA2024-08-23
SPSETIA2024-08-23
SPSETIA2024-08-23
SPSETIA2024-08-23
UEMS2024-08-23
UEMS2024-08-23
UEMS2024-08-23
UEMS2024-08-23
UEMS2024-08-23
UEMS2024-08-22
CLMT2024-08-22
MAHSING2024-08-22
SPSETIA2024-08-22
SPSETIA2024-08-21
CLMT2024-08-21
MAHSING2024-08-21
SPSETIA2024-08-21
SPSETIA2024-08-21
SPSETIA2024-08-21
SPSETIA2024-08-21
TROP2024-08-21
TROP2024-08-20
CLMT2024-08-20
MAHSING2024-08-20
SPSETIA2024-08-20
SPSETIA2024-08-20
SPSETIA2024-08-20
SPSETIA2024-08-20
SPSETIA2024-08-20
SPSETIA