Property stocks rise on more upside for sector

KUALA LUMPUR: Small-capitalised property stocks rose in active trade on Aug 13 on further signs of a recovery in the sector, underpinned by several transactions undertaken by Mah Sing Group Bhd, Felda and Hap Seng Consolidated Bhd.

Major gainers were Guoco Land Bhd, IJM Land Bhd, Hunza Properties Bhd and Eastern & Oriental Bhd. The 86-stock KL Property Index rose 21.96 points or 2.78% to 809.22, outpacing the 30-stock FBM KLCI which closed 0.47% higher at 1,186.19 on Aug 13.

HwangDBS Vickers Research said Mah Sing’s acquisition of 115.25 acres of freehold land in Cyberjaya for RM130.5 million cash from Cyberview Sdn Bhd was the first large landbank acquisition after the recent policy changes to liberalise the property sector.

Koperasi Permodalan Felda’s acquisition of an eight-storey retail and office space for RM226 million cash in Kuala Lumpur from Mah Sing also came on the heels of Hap Seng’s acquisition of a 50% stake in Menara Citibank.

“More landbank acquisitions are likely on the cards (currently four in the Klang Valley, including another large parcel) as Mah Sing expects the sector to experience an upcycle in the second half of 2010,” it said.

Reflecting the confidence in the property market, Mah Sing plans to undertake medium to high-end residential development on the Cyberjaya site, with a potential gross development value (GDV) of RM690 million.

HwangDBS Vickers said increasingly more developers were looking to acquire landbank especially in the Klang Valley as property brokers received more enquiries. 

“Developers with prime landbank in Kuala Lumpur and Penang would stand to benefit more from rising property prices,” it said, pointing out E&O and SP Setia as prime beneficiaries.

On Bursa Malaysia on Aug 13, Guoco Land rose 20 sen to RM1.35, making it the top gainer while IJM Land added 18 sen to RM1.98, Hunza Properties 13 sen to RM1.64, SP Setia 12 sen to RM4.60, E&O 11 sen to RM1.39 while SHL Consolidated Bhd added eight sen to RM1.10 and Bandar Raya Developments Bhd seven sen to RM1.74.
 
Plenitude Bhd added four sen to RM2.59 while Mah Sing and Sunrise Bhd added three sen each to RM2.02 and RM2.08 and UEM Land Bhd two sen to RM1.65.

Maybank  Investment Research said Mah Sing’s RM226 million enbloc property sale to Felda, had raised the property developer’s year-to-date sales to RM543 million. It added that Mah Sing’s new 115 acres of Cyberjaya land would boost its total GDV by 19% to RM4.4 billion.

AmResearch, meanwhile, was upbeat about IJM Land which remained an excellent liquid proxy to the property market given its early cycle growth story with its Penang project, Light Linear — comprising 328 condominiums — with a combined GDV of RM200 million.

“Foreign buying interests are gaining traction, management will soon embark on road shows abroad,” it said.

It said improved trading liquidity in IJM Land stock should gradually pave the way for share price discovery to fair value given its compelling valuations and strong earnings growth trajectory. 

Furthermore, total unbilled sales have now risen to about RM900 million, and looked set to expand comfortably above RM1 billion with at least RM700 million in near-term launches.

HwangDBS Vickers Research has a buy call on SP Setia Bhd and E&O with a target price of RM5 and RM1.50 respectively.
 
It said SP Setia has a knack of acquiring cheap prime landbank and fast land turnaround. It came to understand that SP Setia was bringing forward a RM5 billion mixed development project opposite Midvalley in Kuala Lumpur to 2010.

As for E&O, it said the company was the largest developer in land-scarce Penang with 1,123 acres (including rights to reclaim 740 acres at Seri Tanjung Pinang Phase 2). The group also owns 335 acres in Kuala Lumpur.