Koon Yew Yin's Blog
Slow Property Sales: Be careful of Property Stocks - Koon Yew Yin
Koon Yew Yin
Publish date: Mon, 01 Jun 2015, 10:43 PM
Koon Yew Yin
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An official blog in i3investor to publish sharing by Mr. Koon Yew Yin.
All materials published here are prepared by Mr. Koon Yew Yin
All materials published here are prepared by Mr. Koon Yew Yin
My purpose of writing this article is to help you improve your investment skill.
In my previous article titled ‘An Important Investment Lesson’ I said that you must frequently look at company announcements and when you see any company showing a sudden jump in profit, you should find out more about the company before you rush to buy the share.
After you have verified that the company will surely make more profit in this year than last year, you can buy the share if it is still selling cheaply in terms of P/E ratio.
Moody’s report of slow property sales
Malaysian demand for residential property is set to slow further in 2015, according to a forecast by Moody’s. A report issued by the ratings agency on 5th Feb this year said property demand will be affected by cooling measures introduced in 2013 and weak buyer sentiment.
According to Jacintha Poh, assistant vice-president and analyst at Moody’s, property sales in 2015 should be dampened by anticipated higher mortgage rates, as well as the implementation of the 6% Goods and Services Tax (GST) in April.
Company announcement can be misleading.
Quite often company announcement of quarterly profit can be misleading especially property companies. For example: The recent profit announcement by Hua Yang attracted my attention. Its 4th Quarter EPS was 11 sen and its annual EPS was 41.9 sen and the share is currently selling at about Rm 2.10. Moreover, I was further tempted to buy after I read T A Securities’ buy recommendation as posted on the latest issue of The Edge.
I looked at Hua Yang’s announcement in Bursa and I found out more details of the company. In summary, it has trade and other payables of Rm 142 million, short term borrowings of Rm 79 million and long term borrowing of Rm 192 million.
Share capital Rm 264 million and reserves Rm 202 million=total net assets Rm 466 million.
Hua Yang EGM on 2nd June 2015
The most worrying announcement is that it is calling an EGM on 2nd June 2015, to seek shareholders’ approval to buy a piece of land for Rm 120 million cash. They have to increase their bank borrowing to pay for the land. It looks like the Board of directors does not know that there is already an oversupply of properties in the market and they do not seem to realize that it will take about 7 years to complete the development of the land before they can see any profit.
When you see property companies showing good profit in their latest announcements, it is important to find out if the good result is solely due to the presale of their properties.
Another example: Asian Pac Holdings Bhd or Asiapac showed incredible results for the 1st Quarter 2015 as follows :
With profit of RM369 Million and EPS of 0.3748 sen this company is a winner!!. How can the revenue of Rm 60 million produce a profit of Rm 369 million?
Should you buy the share selling at 27 sen? The answer should be a resounding “NO” as the higher profit is due to revaluation of assets and not from actual trading operation. Hence such results are not sustainable and there will not be a repeat in the next quarter.
Be Careful: When you see property companies showing good profit in their latest announcements, it is important to find out if the good result is solely due to revaluation of assets or due to the presale of their properties.
I talk to a few developers recently and almost all of them told me that they have difficulty in selling their condominiums. They cannot completely sell all their condominiums which are currently open for sale. The worst damaging effect is that they have to construct the whole high rise building even if a small percentage is presold.
Unlike developing terrace or detach houses, the developers can hold on to the vacant land if the houses are not presold and holding vacant land will cost less interest charges than holding completed condominiums.
No more opportunities for speculators:
A few years ago until recently when property prices were rising, speculators could easily make profit by putting small down payments and sell their bookings before the construction completion. Now speculators cannot do it because property prices are falling.
Avoid buying property shares in general because their profit growth prospect is not so bright. There might be a few exceptions that I do not know.
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Discussions
6 people like this. Showing 50 of 75 comments
maybe mr koon talking about short term investment (for the coming 2~3 years)..but landbank is limited resource and demand is always there. From my point of view, i c no reason for property price to fall
2015-06-02 09:40
Hi Murali.. Mr Koon made at least RM80mil to RM100Mil from Supermax alone
2015-06-02 09:45
Dont know why..just like Calvin, when they got good tips, they bought low low and diam diam n then told everybody how much they made after they sold....
2015-06-02 09:47
But I think that is still ok to boast around...but now no so good loh...ask people to buy high when they wanna sell high (or sold high)
2015-06-02 09:48
Is Koon Koon our Malaysian Warrent Buffet? Hmmmmmmmmmm.......but I personally think he deserves to be Malaysian Ting Hai....He believes whatever he did in I3 is with noble intention, helping people to learn investing etc....
2015-06-02 09:58
Property collapse sooner or later
No one can predict
Hopefully the same cycle in 2008 can repeat
2015-06-02 09:59
But why he keeps on doing the same trick? Asking people to buy VS n Latitude at this level now while he is selling his cheap stocks(or oredi sold high?)
2015-06-02 10:04
Once Koon Koon cease his tricks I shall cease fire...if not pls bear with us (Koon Koon n I)...
2015-06-02 10:05
Of course everyone is worry about it because most people had invested heavily in property
They defend themself even harder if any bad news arise
No matter what they wanna debate about
The time will show us the truth
2015-06-02 10:07
Hi Mr. Murali.. This forum is just for us to share our views. Mr.Koon is not forcing us to buy so don't be so emotional. We must make own decision and take our own risk and not to blame others.
2015-06-02 10:08
I had heard recently there is many unsold unit still pricing at a horrible price
Those who purchase recently will be the one who fear the most
2015-06-02 10:09
fortunebullz...how do you derive the Income of Imago Mall of RM 70m ?...It that INCOME NETT ?.....
2015-06-02 10:10
if the klse drop further to let's say 1200 point
I believe most high end property will be traded at big discount
2015-06-02 10:24
Of course for klse to drop to 1200
I can see a lot of stock also will be traded at the even lower
That is all investor loss in the market
Is it the end of the days?
Cash is king!
2015-06-02 10:30
i don't give a damn if all the property speculators jump from their empty condominiums. they are the scum of the earth and the lowest form of human life.
2015-06-02 10:38
if property sales slow, next to slow are furniture stocks, because furniture stocks are laggard to the property sector. only when property complete will house buyers buy furniture.
2015-06-02 10:52
I will feel sorry to my friend who had just purchase a high end condominium of his dream
It cost a million for about 1000 psf
And he think it is a good buy
2015-06-02 10:53
I have keep up with Mr. Koon since JTiasa and Mudajaya! I was sceptical then! You dont't recommend JTiasa if you know palm oil demand and price is weak! You don't recommend Mudajaya when MCA at it's weakest! Recomending VS and Latitud at high price is a big no no to any respectable analyst! And now Mr. Koon can't even tell a tree from a forest when he wrongly quote Asiapac as sole property developer without knowing why the revaluation of Imago mall recently included in it's book! I am sorry Mr. Koon, but you have much to learn!
2015-06-02 11:47
I don't know about other people. But i know from my own experience that when you read and learn from others you need to also think by yourself not plainly only listening to others and follow them. If one just follow others trying to take the easy way without doing own research or study then when you win i say you're lucky. If you lose then I will say you deserve to pay the tuition fee cause one did not make own research and plainly following others only. Always remember different folks have different strokes, in maths there is no same answer for all question just same method for all question. It is the methodology / fundamentals that is important but always in stock people seems to want easy way give me the answer which is the price and end up losing money / paying tuition fee with maybe their life savings.
2015-06-02 11:56
Mr. Koon, Asianpac revaluation, though not a realised profit, but it has reveal the potential earnings from the property concern. The property is an investment property which could generate future income/cashflow. The actual performance is yet to be proven but it is for the investors at large to evaluate the risks and rewards before they buy into Asianpac.
2015-06-02 13:12
Murali, seems that you are the very few who manage to see through his tricks and "noble intentions". but they are always ignorant supporters who follow blindly of his articles and 'recommendations'. everytime ppl like us disclose and debunk his "good faith", then he will retaliate and calls us stupid. can't blame KYY for that, if got ppl obstruct ur path to making money, you also hate them right? haha...
2015-06-02 13:38
ks55, he is definitely not acting in good faith and noble in intentions. those who has followed his movements in Jayatiasa and Mudajaya can predict wats his next move in VS and Lattitude. When he is accumulating, he will be silent. when he accumulated enough at low price, he will be loudspeaker and promote the stock, leaving some crumbs for forumers here to chase after. then he slowly disposes off and leave without a trace. Can't blame him, every man for his own in the stock market. no such thing as "noble intentions". like it was mentioned earlier, legally correct, ethically and morally wrong.
2015-06-02 13:44
If you blindly chased and unfortunately got stucked under the wheel think of it as a charity for the scholarship of the other underprivileged students instead as tuition fee. You might feel better that way.
2015-06-02 14:17
for most people property is the best place to park their money if they are not playing the stock market ( most people do not trust the stock market ). Keeping cash is useless because money becomes smaller every day, so people got no choice but to buy properties. Mr Koon seems to be outdated FD person I supposed.
2015-06-02 14:38
How about bought for retirement
However the last resort is still buy for own stay which I think is hilarious
speakup
4724 posts
Posted by speakup > Jun 2, 2015 11:06 AM | Report Abuse
Christensen, if buy to stay is ok, if buy to flip..... sorry lah.
2015-06-02 14:48
Bro Skyz, I think many of us see through the old man's tricks (who cant?), just I am the only one acting like a broken records, whacking again n again...maybe I love him much more than anyone here....
2015-06-02 15:44
true... developers all jump into the bandwagon of property hoohaa! now supply is more than demand ! the property sector wont necessary crush, but definitely will slow down. until small players are shake out, equilibrium will come
2015-06-02 15:50
It is interesting to note that some of the comments here point to future business of Asiapac - re the Imago Mall. With the GST, consumers are more careful how they spend. Also do you think the mall can afford to charge high rental? Also, Mall operations reported a negative RM4 which is an increase from last year. Property development income is also winding down.
I suggest all to download the recent results of Asiapac and read thru it carefully. Also since all here like to use charts, the gap up the other day was a definite SELL volume. Those who want to see my full report and register as a Club Member at www.kiasutrader.com. Cheers
2015-06-02 16:10
Of course I am starting to become cautious when I see plenty of property unsold
More and more people trying to low ball the property price
They go around and ask the price
And they will do it over and over again for several months
I think many people are well prepared to buy at bargain when the collapse happen
2015-06-02 16:22
KYY talk like expert in property. His own area of expertise also down the drain. What happen to mudajaya? What happen to Jtiasa??
2015-06-02 16:24
in total agreement ....just look at Iskandar n all the unsold properties there will show u the right path to take...
2015-06-02 16:50
people has been complaining property is not easy to rent and even harder to sell
Very few people can actually afford to purchase property after the price has been turn two to three fold over the 10 years
How much property will go down so that most of the average people can afford to buy property of their dream?
I personally think property need to go down at least 50% so that people are happy to buy them
2015-06-02 17:29
As long as there is still holding power with support from parents saving and got job on hand, property prices wont go down but sustain at this level. Buyers who bought their properties in 2011, 2012 and 2013 are unable to accept the fact that it is no longer the same. There are no more hot market for properties as the price has increased into a level that not many ppl can afford it.
Anyway, ppl still have saving and job to hold on to the properties. Until the saving is exhausted and the economy get worst due to weakening Ringgit and also the stupid scandal of 1MDB, we may be able to see some correction by then. I don't think this will happen within 2015. Maybe 2016 the earliest.
2015-06-02 18:06
Don't waste time on non essential
Go Buy Oil & Gas Counters!
The Next Thematic Play in Malaysian Context.
Follow the PATH OF MONEY IN INVESTMENT - Pengerang Rapid will Dish Out Projects over RM100 Billions for Oil & Gas Players.
2015-06-02 19:50
kiasutrader, you know why Asianpac got 4mil loss on mall operation or not? Dig further before tok. Investment always carry a risk factor. How sure are you the Imago Mall operates by Asianpac is not able to perform in future? As for me, I am never sure, but am taking a risk, then manage it.
2015-06-02 19:55
let me ask, if don't buy property.. where else can you park your money apart from share market ?
2015-06-03 08:18
Around kota kemunin areas,ppl still queing for ds terrace house for min 1mil each!How many youngsters
can afford to buy without parent 'help.?
2015-06-03 15:04
Hi all;
Actually, Mr Koon's article is quite insightful. But then, i need to highlight 2 points:
"It looks like the Board of directors does not know that there is already an oversupply of properties in the market and they do not seem to realize that it will take about 7 years to complete the development of the land before they can see any profit."
(1): Oversupply of properties in the market: There is a shortage of affordable housing in the market. If your counter is like Matrix Concept whereby the price per square feet is at RM7 and they are able to sell at RM40 to RM45 per square feet, then there is nothing to fear. In fact, Matrix Concept is reporting positive operating cash flows every quarter. Actually, now is the best time to buy property counters that have huge tracts of landbank (better still; if they bought it at dirt cheap prices last time). Here, the developers can build their "bread-and-butter" affordable housing to weather through this period of property slowdown.
(2): Takes 7 years to complete the development of the land before they can see any profit: Normally, developers will develop the land by phases and then recognise progressive billings based on percentage of completion on that particular project. Hence, developers will book in the profits throughout the lifetime of the projects. Hence, developers do not need to wait until the end of 7 years to start recognising profits.
In addition, about the pre-sold properties: I concur with Mr Koon that if the condominium was recently launched and if the take up rate is poor, then the developers will be in deep trouble. This is because upon completion of the condominium, there is no buyers and there will be a build up of inventories. This will create a liquidity crunch because the monies are tied up with inventories and to make matters worst, the developers need to continually service the bank loans.
However, if the pre-sold properties has hit about 50% to 60% of the project's GDV, the developer need not fear because they have kind of like break even.
2015-06-03 16:33
1mil only, many mid income household can actually afford it (10k ~ 12k) can easily afford it with both working.
2015-06-03 16:46
Your rule of thumb for buying house is the same as valuations. It changes overtime depending on GDP and etc. I had made it, others had made it. Yes no doubt its difficult but nothing comes without hardship.
In the past valuation is 12 times, nowadays 18 times and its still going up. There is no right or wrong, just a matter of discipline to get it achieved.
Yes, who wouldn't want to have lower Rule of thumb.
In the past buying house i only need to pay 30x my monthly salary.
Nowadays rising to 100x but do you have a choice if you had nothing to start with?
2015-06-05 13:39
Property price never increase it just ours money keep and keep diluted....
In stock market many are pump and dump counter, in property market many are pump and dump property type such as soho (bad location just like bad counter in stock market).
When slow down property sale, best time for you hunting good property or ur sweet home since it may be under correction period.
PROPERTY is the BEST location TO PART UR MONEY and PROTECT UR MONEY.
PROPERTY STOCK?? hahahaha
2015-06-05 13:50
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murali
To ask people to buy at high level while himself is sitting on hugh paper gain is certainly no angel lah
2015-06-02 09:38