Share
• SunCity took centre stage in April
The KL Property Index ended the month largely unchanged at +0.6%. Nevertheless, interests were seen in Sunway City which gained 17.8% last month as it gained further traction in its REIT listing.
• NAPIC 2009 numbers revealed a buoyant market in 4Q09
NAPIC released the property market report 2009 last month. Despite an uninspiring set of numbers for 2009 as a whole, the property market remains buoyant over the second half of 2009. In fact, 4Q09 was a record quarter for both the residential and commercial sub-segments. Another positive observation was the increase in sales take-up rate to 48.0% from 44.5% in 2008, the highest in 5 years.
• Activities in REIT sub-segment
There was a hive of activities in the REIT sub-segment last month. The listing of SunCity’s REIT is a step closer to reality following its announcement of the injection of 8 investment properties into its REIT vehicle. Meanwhile, Starhill REIT also moved a step closer to positioning itself as a hospitality REIT following the sale of Starhill Gallery and Lot 10 to Starhill Global REIT for RM629m and RM401m respectively. Last but not least, Axis REIT acquired a warehouse and office building in Johor for RM30m which yield 9.16% on a triple net basis.
• Landbanking activities by developers
Sunway Holdings attracted much attention in landbanking activities last month following two acquisitions. The company has been on acquisition trail of late and YTD, it has already secured 3 new projects with land area of 148.7 acres and GDV of RM870m. Other notable transactions among listed developers include Mah Sing’s acquisition of a 1.44 acres freehold commercial land in Ampang, Selangor, from Fraser & Neave Holdings for RM53.8m cash and Dijaya Corp taking a 75% stake in a joint venture to develop a mixed property project in Mongolia.
• Maintain OVERWEIGHT
We remain bullish on the residential sub-segment of the property sector, as we believe investors’ concern on the impact of interest rate hike has been overblown. We hold the view that interest rate hike will be gradual and minimal. Further to that, property sales is driven more by sentiment, which remains buoyant, rather than interest rate alone. We like the residential sub-segment on expectation of higher sales in CY2010 amid still low interest rate and improving sentiments. We see little upside in big cap property stocks and as such prefer laggard mid-cap property stocks such as Sunway City and Sunrise. Among non-rated property stocks, we like Mah Sing.
Market snapshot
The KL Property Index ended the month largely unchanged at +0.6%. Nevertheless, interests were seen in Sunway City which gained 17.8% last month as it gained further traction in its REIT listing. YNH Property also made significant gains of 13.5% last month as it rebounded from a recent intraday low of RM1.45 in mid March. While 1QFY10 results showed significant improvement on both y-o-y and q-o-q basis, we remain concern about its earnings visibility in 2HFY10 when contribution from Ceriaan Kiara will cease.
On major shareholding changes, Employees Provident Fund (EPF) acquired 7.9m shares in SP Setia last month while trimming 0.2m shares in Sunrise. However, Tong Kooi Ong accumulated 0.6m shares in the latter. YNH Property seen some bottom picking among its major shareholders as Dato' Dr. Yu Kuan Chon, Aberdeen Asset Management and Lembaga Tabung Haji all added 0.5m, 0.7m and 1.3m shares respectively.
NAPIC 2009 numbers revealed a buoyant market in 4Q09
The National Property Information Centre (NAPIC) released the Property Market Report 2009 last month which revealed that the Malaysian property market contracted by 8.3% in 2009 to RM81.0bn (2008: RM88.3bn). Nonetheless, the property market did better than 2007 which recorded transaction value of RM77.1bn. Despite an uninspiring set of numbers for 2009 as a whole, the property market remains buoyant over the second half of 2009.
In fact, 4Q09 was a record quarter for both the residential and commercial sub-segments. Another positive observation was the increase in sales take-up rate to 48.0% from 44.5% in 2008, the highest in 5 years. Meanwhile, property launches bottom out in 1Q09 and has been growing moderately ever since. For further details, refer to our property sector update report “A Record 4Q09” published on 26 April 2010.
Activities in REIT sub-segment
There was a hive of activities in the REIT sub-segment last month. The listing of SunCity’s REIT, potentially the largest in Malaysia, is a step closer to reality following its announcement of the injection of 8 investment properties into its REIT vehicle. Although the consideration is not determined yet, we estimate these assets to have an estimated value of around RM2.9bn, based on 6.5% cap rate assumption. The listing of the REIT will unlock the value of SunCity’s investment properties. Although share price has moved up by 17.8% this month, it is still trading substantially lower than its RNAV of RM5.77.
Meanwhile, Starhill REIT, currently the largest in Malaysia by market capitalisation, has moved a step closer to positioning itself as a hospitality REIT following the entering into two conditional sales and purchase agreements to dispose of Starhill Gallery and Lot 10 to Starhill Global REIT for RM629m and RM401m respectively. Within 6 months from the completion of the disposal, Starhill REIT will utilise at least 90% of the sale proceeds to acquire hospitality assets from YTL group and/or other parties.
Axis REIT has again proven its exemplary track record in yield accretive acquisition when it announced plans to acquire for a warehouse and office building within the Pelepas Free Zone in Johor for a combined RM30m. This property yields 9.16% on a triple net basis and is expected to accrete 13 sen to earnings per unit in FY2010.
Landbanking activities by developers
While SunCity hogged the limelight with its REIT listing, its sister company Sunway Holdings attracted much attention in landbanking activities last month following two acquisitions. First, it acquired a 65% stake in a joint venture to develop 16.9 acres leasehold land in Bukit Jalil into a RM120m residential project, then it announced plans to buy 33.37 acres of leasehold land in Taman Equine from Equine Capital for RM37.8m. It intends to build semi-detached and bungalow villas on the latter land, which has an indicative gross development value (GDV) of RM250m and is scheduled for launch in early 2011.
The company has been on acquisition trail of late and YTD, it has already secured 3 new projects with land area of 148.7 acres and GDV of RM870m. Remaining GDV now stands at RM3.4bn (effective share is RM1.9bn) and management is expected to continue adding more landbank to capitalise on buoyant property market. Besides its growing Malaysian landbank, Sunway Holdings is also a good proxy play for Singapore property market given its three joint ventures there.
Other notable landbanking activities last month include:
• Mah Sing’s acquisition of a 1.44 acres freehold commercial land in Ampang, Selangor, from Fraser & Neave Holdings for RM53.8m cash which will be developed into serviced residences known as M Suites @ Jalan Ampang with an estimated GDV of RM257m. The project is expected to commence in 2H2010.
• Dijaya Corp taking a 75% stake in a joint venture to develop a mixed property project worth US$174m (RM559.7m) in Mongolia.
• Iskandar Malaysia secures RM1.7bn of investment from Australia’s Walker Corp to develop Senibong Cove on 84ha freehold land in Permas Jaya which is located on the eastern corridor of Iskandar Malaysia. The project will be developed in a joint venture with the landowner, Iskandar Waterfront Sdn Bhd.
• Titijaya Group’s acquisition of 6.04 acres of leasehold commercial land in Pusat Bandar Putra Permai from Equine Capital for RM19.6m cash. We expect more landbanking activities going forward. SP Setia has plans to double its landbank in Penang from about 66ha currently while MRCB is eyeing land in Iskandar Malaysia through joint venture with land owners or other parties. Furthermore, Berjaya group is planning to develop a US$500m (RM1.6bn) property project in Japan comprising a hotel and residential properties on Okinawa Island in the south of Japan. The company is in the process of acquiring land there.
Other notable property news
Other notable property news last include the following:
• Johor Corporation is undertaking a conditional takeover offer for the remaining shares in Damansara Realty for RM0.80 cash per share after it has triggered the 33% threshold for mandatory takeover last Friday. It intends to keep the listing status of Damansara Realty. Based on closing price of RM0.78 last Friday, the offer price only offers 2.6% premium. However, the offer price is 77.8% higher than Damansara Realty’s net asset per share of RM0.45 as at 31 December 2009.
• Talam Corp seems to be on track to lift itself out of PN17 after it entered into a supplementary settlement agreement with the Menteri Besar Selangor Inc (MBI) to settle the balance debt amounting to RM150.61m it owes MBI, by way of disposal of land in Bukit Beruntung 2. In fact, according to a report by The Edge, it has submitted an application to Bursa Malaysia last Friday to exit the PN17 status.
• SHL Consolidated Bhd is buying 60% of Goodstock Land Sdn Bhd (GSL) from shareholders Datuk Yap Teiong Choon and Datuk Yap Chong Lee for RM25.56m. Teiong Choon and Chong Lee holds equal share in GSL, which owns Wisma Sin Heap Lee at Jalan Tun Abdul Razak, KL. This transaction priced the office building with NLA of 66,728 sq ft at RM674 psf.
• Tradewinds Corporation has terminated a joint venture with Oxbridge Height Sdn Bhd to develop some 704 acres of land in Tebrau, Johor Bahru following the latter’s failure to fulfil its private debt securities and guaranteed-payment obligations. Stocks valuation and recommendation We remain bullish on the residential sub-segment of the property sector, as we believe investors’ concern on the impact of interest rate hike has been overblown.
We hold the view that interest rate hike will be gradual and minimal. Further to that, property sales is driven more by sentiment, which remains buoyant, rather than interest rate alone. We like the residential sub-segment on expectation of higher sales in CY2010 amid still low interest rate and improving sentiments.
We see little upside in big cap property stocks and as such prefer laggard mid-cap property stocks such as Sunway City and Sunrise. Although upside to our TP for Sunway City has narrowed to just 11% following gains in recent weeks, we see further upside as it is backed by RNAV of RM5.77 which is conservative. We will be reviewing our valuation of Sunway City in due course. On the other hand, Sunrise is severely undervalued despite its recent strong sales from its MK 28 project will continue to underpin earnings visibility. It offers 52.1% upside to our TP. Among non-rated property stocks, we like Mah Sing.
The KL Property Index ended the month largely unchanged at +0.6%. Nevertheless, interests were seen in Sunway City which gained 17.8% last month as it gained further traction in its REIT listing.
• NAPIC 2009 numbers revealed a buoyant market in 4Q09
NAPIC released the property market report 2009 last month. Despite an uninspiring set of numbers for 2009 as a whole, the property market remains buoyant over the second half of 2009. In fact, 4Q09 was a record quarter for both the residential and commercial sub-segments. Another positive observation was the increase in sales take-up rate to 48.0% from 44.5% in 2008, the highest in 5 years.
• Activities in REIT sub-segment
There was a hive of activities in the REIT sub-segment last month. The listing of SunCity’s REIT is a step closer to reality following its announcement of the injection of 8 investment properties into its REIT vehicle. Meanwhile, Starhill REIT also moved a step closer to positioning itself as a hospitality REIT following the sale of Starhill Gallery and Lot 10 to Starhill Global REIT for RM629m and RM401m respectively. Last but not least, Axis REIT acquired a warehouse and office building in Johor for RM30m which yield 9.16% on a triple net basis.
• Landbanking activities by developers
Sunway Holdings attracted much attention in landbanking activities last month following two acquisitions. The company has been on acquisition trail of late and YTD, it has already secured 3 new projects with land area of 148.7 acres and GDV of RM870m. Other notable transactions among listed developers include Mah Sing’s acquisition of a 1.44 acres freehold commercial land in Ampang, Selangor, from Fraser & Neave Holdings for RM53.8m cash and Dijaya Corp taking a 75% stake in a joint venture to develop a mixed property project in Mongolia.
• Maintain OVERWEIGHT
We remain bullish on the residential sub-segment of the property sector, as we believe investors’ concern on the impact of interest rate hike has been overblown. We hold the view that interest rate hike will be gradual and minimal. Further to that, property sales is driven more by sentiment, which remains buoyant, rather than interest rate alone. We like the residential sub-segment on expectation of higher sales in CY2010 amid still low interest rate and improving sentiments. We see little upside in big cap property stocks and as such prefer laggard mid-cap property stocks such as Sunway City and Sunrise. Among non-rated property stocks, we like Mah Sing.
Market snapshot
The KL Property Index ended the month largely unchanged at +0.6%. Nevertheless, interests were seen in Sunway City which gained 17.8% last month as it gained further traction in its REIT listing. YNH Property also made significant gains of 13.5% last month as it rebounded from a recent intraday low of RM1.45 in mid March. While 1QFY10 results showed significant improvement on both y-o-y and q-o-q basis, we remain concern about its earnings visibility in 2HFY10 when contribution from Ceriaan Kiara will cease.
On major shareholding changes, Employees Provident Fund (EPF) acquired 7.9m shares in SP Setia last month while trimming 0.2m shares in Sunrise. However, Tong Kooi Ong accumulated 0.6m shares in the latter. YNH Property seen some bottom picking among its major shareholders as Dato' Dr. Yu Kuan Chon, Aberdeen Asset Management and Lembaga Tabung Haji all added 0.5m, 0.7m and 1.3m shares respectively.
NAPIC 2009 numbers revealed a buoyant market in 4Q09
The National Property Information Centre (NAPIC) released the Property Market Report 2009 last month which revealed that the Malaysian property market contracted by 8.3% in 2009 to RM81.0bn (2008: RM88.3bn). Nonetheless, the property market did better than 2007 which recorded transaction value of RM77.1bn. Despite an uninspiring set of numbers for 2009 as a whole, the property market remains buoyant over the second half of 2009.
In fact, 4Q09 was a record quarter for both the residential and commercial sub-segments. Another positive observation was the increase in sales take-up rate to 48.0% from 44.5% in 2008, the highest in 5 years. Meanwhile, property launches bottom out in 1Q09 and has been growing moderately ever since. For further details, refer to our property sector update report “A Record 4Q09” published on 26 April 2010.
Activities in REIT sub-segment
There was a hive of activities in the REIT sub-segment last month. The listing of SunCity’s REIT, potentially the largest in Malaysia, is a step closer to reality following its announcement of the injection of 8 investment properties into its REIT vehicle. Although the consideration is not determined yet, we estimate these assets to have an estimated value of around RM2.9bn, based on 6.5% cap rate assumption. The listing of the REIT will unlock the value of SunCity’s investment properties. Although share price has moved up by 17.8% this month, it is still trading substantially lower than its RNAV of RM5.77.
Meanwhile, Starhill REIT, currently the largest in Malaysia by market capitalisation, has moved a step closer to positioning itself as a hospitality REIT following the entering into two conditional sales and purchase agreements to dispose of Starhill Gallery and Lot 10 to Starhill Global REIT for RM629m and RM401m respectively. Within 6 months from the completion of the disposal, Starhill REIT will utilise at least 90% of the sale proceeds to acquire hospitality assets from YTL group and/or other parties.
Axis REIT has again proven its exemplary track record in yield accretive acquisition when it announced plans to acquire for a warehouse and office building within the Pelepas Free Zone in Johor for a combined RM30m. This property yields 9.16% on a triple net basis and is expected to accrete 13 sen to earnings per unit in FY2010.
Landbanking activities by developers
While SunCity hogged the limelight with its REIT listing, its sister company Sunway Holdings attracted much attention in landbanking activities last month following two acquisitions. First, it acquired a 65% stake in a joint venture to develop 16.9 acres leasehold land in Bukit Jalil into a RM120m residential project, then it announced plans to buy 33.37 acres of leasehold land in Taman Equine from Equine Capital for RM37.8m. It intends to build semi-detached and bungalow villas on the latter land, which has an indicative gross development value (GDV) of RM250m and is scheduled for launch in early 2011.
The company has been on acquisition trail of late and YTD, it has already secured 3 new projects with land area of 148.7 acres and GDV of RM870m. Remaining GDV now stands at RM3.4bn (effective share is RM1.9bn) and management is expected to continue adding more landbank to capitalise on buoyant property market. Besides its growing Malaysian landbank, Sunway Holdings is also a good proxy play for Singapore property market given its three joint ventures there.
Other notable landbanking activities last month include:
• Mah Sing’s acquisition of a 1.44 acres freehold commercial land in Ampang, Selangor, from Fraser & Neave Holdings for RM53.8m cash which will be developed into serviced residences known as M Suites @ Jalan Ampang with an estimated GDV of RM257m. The project is expected to commence in 2H2010.
• Dijaya Corp taking a 75% stake in a joint venture to develop a mixed property project worth US$174m (RM559.7m) in Mongolia.
• Iskandar Malaysia secures RM1.7bn of investment from Australia’s Walker Corp to develop Senibong Cove on 84ha freehold land in Permas Jaya which is located on the eastern corridor of Iskandar Malaysia. The project will be developed in a joint venture with the landowner, Iskandar Waterfront Sdn Bhd.
• Titijaya Group’s acquisition of 6.04 acres of leasehold commercial land in Pusat Bandar Putra Permai from Equine Capital for RM19.6m cash. We expect more landbanking activities going forward. SP Setia has plans to double its landbank in Penang from about 66ha currently while MRCB is eyeing land in Iskandar Malaysia through joint venture with land owners or other parties. Furthermore, Berjaya group is planning to develop a US$500m (RM1.6bn) property project in Japan comprising a hotel and residential properties on Okinawa Island in the south of Japan. The company is in the process of acquiring land there.
Other notable property news
Other notable property news last include the following:
• Johor Corporation is undertaking a conditional takeover offer for the remaining shares in Damansara Realty for RM0.80 cash per share after it has triggered the 33% threshold for mandatory takeover last Friday. It intends to keep the listing status of Damansara Realty. Based on closing price of RM0.78 last Friday, the offer price only offers 2.6% premium. However, the offer price is 77.8% higher than Damansara Realty’s net asset per share of RM0.45 as at 31 December 2009.
• Talam Corp seems to be on track to lift itself out of PN17 after it entered into a supplementary settlement agreement with the Menteri Besar Selangor Inc (MBI) to settle the balance debt amounting to RM150.61m it owes MBI, by way of disposal of land in Bukit Beruntung 2. In fact, according to a report by The Edge, it has submitted an application to Bursa Malaysia last Friday to exit the PN17 status.
• SHL Consolidated Bhd is buying 60% of Goodstock Land Sdn Bhd (GSL) from shareholders Datuk Yap Teiong Choon and Datuk Yap Chong Lee for RM25.56m. Teiong Choon and Chong Lee holds equal share in GSL, which owns Wisma Sin Heap Lee at Jalan Tun Abdul Razak, KL. This transaction priced the office building with NLA of 66,728 sq ft at RM674 psf.
• Tradewinds Corporation has terminated a joint venture with Oxbridge Height Sdn Bhd to develop some 704 acres of land in Tebrau, Johor Bahru following the latter’s failure to fulfil its private debt securities and guaranteed-payment obligations. Stocks valuation and recommendation We remain bullish on the residential sub-segment of the property sector, as we believe investors’ concern on the impact of interest rate hike has been overblown.
We hold the view that interest rate hike will be gradual and minimal. Further to that, property sales is driven more by sentiment, which remains buoyant, rather than interest rate alone. We like the residential sub-segment on expectation of higher sales in CY2010 amid still low interest rate and improving sentiments.
We see little upside in big cap property stocks and as such prefer laggard mid-cap property stocks such as Sunway City and Sunrise. Although upside to our TP for Sunway City has narrowed to just 11% following gains in recent weeks, we see further upside as it is backed by RNAV of RM5.77 which is conservative. We will be reviewing our valuation of Sunway City in due course. On the other hand, Sunrise is severely undervalued despite its recent strong sales from its MK 28 project will continue to underpin earnings visibility. It offers 52.1% upside to our TP. Among non-rated property stocks, we like Mah Sing.
SHARE
