HwangDBS sees upturn in luxury property segment

HWANGDBS Vickers is positive on the recent pick-up in the luxury segment of the local property market, stating that it was a strong indicator that the sector’s recovery is broadening.

“Just a few weeks ago, this segment was considered dead by many. This is a positive development for developers with ready-to-launch products who will be able to capitalise on this early recovery,” stated HwangDBS in a report yesterday.

A recent visit to the high-end Binjai on the Park, the only residential development on KLCC park, revealed a strong take-up rate.

“Take-up rate has picked up strongly from 10% in July 2009 to 35%, with en bloc buying emerging. Of this, 30% of the buyers consist of foreigners, while 60% are paying cash. Compared to the initial launch in August 2008 that coincided with the onset of the global financial meltdown, the average selling price has been reduced from RM2,800 psf to RM2,400 psf, while smaller units (2,200 sq ft) were released at RM1,700 psf,” said HwangDBS.

Binjai is developed by KLCC Holdings, an unlisted wholly owned subsidiary of national oil company Petronas.

The research house has buy calls on DNP Holdings Bhd, Eastern & Oriental Bhd and S P Setia Bhd and also listed these companies as its top picks for the property sector as the luxury segment starts to recover.

HwangDBS has pegged DNP, a niche high-end developer at KLCC that is 54%-owned by Wing Tai Holdings Ltd Singapore, with a target price of RM2.60.

“DNP has RM1.5 billion worth of launches in the pipeline, which include the Verticas Residensi condos at Bukit Ceylon that has a gross development value of RM726 million. So far 64% of the 70 units soft launched have been sold since July this year, while international marketing in Hong Kong started last weekend,” said HwangDBS.

The research house favoured E&O, another niche high-end developer in Kuala Lumpur and Penang, for its RM2.2 billion worth of launches in the pipeline.

Among its ongoing developments include St Mary Tower A in Kuala Lumpur with a gross development value (GDV) of RM540 million and Seri Tanjung Pinang with a GDV of RM1.6 billion.

HwangDBS has a target price of RM2.10 for E&O.

As for S P Setia, HwangDBS said: “The company is a proxy for the Malaysian property sector, as the largest residential developer by market capitalisation and sales. So far for the first nine months of FY09, S P Setia has posted sales of RM1.25 billion compared to the previous year’s corresponding period where sales amounted to RM1.1 billion.”

The research house has a target price of RM5 on the stock. Other positive factors include the fact that S P Setia is bringing forward a RM5 billion mixed development project located opposite Mid Valley as well as the company’s knack for acquiring cheap prime landbank.

At yesterday’s close, DNP and S P Setia each rose one sen to RM1.70 and RM4.31 respectively while E&O fell four sen to RM1.53.

This article appeared in The Edge Financial Daily, September 10, 2009.
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