CIMB Research downgrades property sector to 'neutral'

KUALA LUMPUR (Jan 2): CIMB Research has downgraded the Property sector to “Neutral” from “Overweight” and said while the property sector was one of the better performing sectors in 2014, that would be difficult to sustain in 2015 in view of the imminent implementation of the 6% goods and services tax (GST) starting Apr 1.

In a note Friday, the research house said 2015 was going to be another tough year for developers in terms of sales and investors should be selective in their exposure to property stocks.

“We downgrade the property sector from overweight to Neutral while downgrading UEM Sunrise Bhd from “Buy” to “Hold” and S P Setia Bhd from “Hold”to “Reduce”.

“Our top picks remain the top-2 best-managed companies in the sector, Mah Sing Group Bhd and Eco World Development Group Bhd. They have the best chances of bucking the softer sales trend,” it said.

CIMB Research said developers faced a slow 1H14 on the back of the 2014 Budget measures to curb speculation announced in Oct 2013.

But it said property sales started to pick in 2H14 on the back of renewed confidence and expectations that property prices will rise after GST is implemented.

“We believe this pick up in buying momentum will continue in 1Q15, but buyers will likely adopt a wait-and-see attitude for 6-9 months after that, which would be in line with the typical consumer behaviour experienced in most countries that implemented GST.

“The net effect is that 2015 could end up being a similar year to 2014 in terms of property transactions, which we would categorise as a lacklustre year,” it said.