Fighting for a home

Post date: Jul 11, 2010 3:38:14 PM

• • 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.AnalystYee Mei Hui +603 2711 1332 +603 2711 1332meihui@hwangdbsvickers.com.myReport fromHWANGDBS Vickers Research Sdn Bhd (128540 U)