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· Rotational plays on property stocks
The KL Property Index gained 8.2% in July as the property sector which has lagged behind the broad market in 1H10 took centre stage. There has been rotational play on Iskandar Malaysia property stocks first which was followed by Penang property stocks. Some notable gainers during the month include UEM Land, Plenitude, KSL and E&O. Penang-based property developer Ivory Properties also made a strong listing debut on 28 July, rising by 36.0%. It ended the month 37% higher. On major shareholding changes, July saw net accumulation in SP Setia, Sunrise, YNH Property and Glomac.
· EPF introduces Flexible Withdrawal Scheme
The long-awaited new housing withdrawal scheme in the shape of “Flexible Withdrawal Scheme” has been implemented from 1 August. Its name is a bit of a misnomer though since it does not involve any physical withdrawal. The scheme allows members to increase their maximum housing loan limit by transferring part of existing Account 2 and future contributions into Account 11 which acts as a comfort to participating banks in granting housing loans of higher limit to EPF members. Although we are disappointed that the new scheme falls short of our expectation of an actual withdrawal, it is still a positive for the property sector especially among first time home buyers. However, how much the scheme will improve home buyers affordability will depend on the quantum of additional loans which can be taken from banks. This is not quantifiable at this juncture as our checks with participating banks revealed that internal guidelines have not been circulated yet.
· Other notable property news
We continued to see steady news flow on acquisitions as well as joint ventures. Notable transactions during the month involve Mah Sing, Bandar Raya, Gamuda, Multi-Purpose, Axis REIT and CapitaMalls Malaysia Trust.
July also saw notable new property launches by Mah Sing (Icon Residence Mont’ Kiara) and UEM Land (Symphony Hills).
· 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 like mid-cap property stocks such as Sunway City and Sunrise due to more compelling valuations. We also like Mah Sing among non-rated property stocks.
The KL Property Index gained 8.2% in July as the property sector which has lagged behind the broad market in 1H10 took centre stage. There has been rotational play on Iskandar Malaysia property stocks first which was followed by Penang property stocks. Some notable gainers during the month include UEM Land (+16.4%), Plenitude (+28.7%), KSL (12.2%) and E&O (+31.1%). Penang-based property developer Ivory Properties also made a strong listing debut on 28 July, rising by 36.0%. It ended the month 37% higher.
On major shareholding changes, July saw net accumulation in SP Setia, Sunrise, YNH Property and Glomac. Skim Amanah Saham Bumiputra added 2.0m shares in SP Setia, while Employees Provident Fund (EPF) added 0.4m and 0.1m shares in SP Setia and Sunrise respectively. Tan Sri Dato' Tan Chee Sing also added 1.2m shares in Sunrise. Dato' Dr. Yu Kuan Chon continued to support YNH Property with accumulation of 0.6m shares. Of interest was the transfer of 10m shares in Glomac by Tan Sri Dato' Mohamed Mansor to his son, Dato' Fateh Iskandar. Datuk Richard Fong also added 0.1m shares in Glomac.
EPF introduces Flexible Withdrawal Scheme
EPF CEO Tan Sri Azlan Zainol announced on 29 July the introduction of Flexible Withdrawal Scheme to enable EPF members to qualify for higher property loans. Recall that the Prime Minister has announced during Budget 2010 last year that EPF will launch a new housing withdrawal scheme to boost housing affordability in January 2010. The Flexible Withdrawal Scheme, which is effective from 1 August, is bit of a misnomer as it does not involve the withdrawal of EPF savings for purchase of residential property. What it does do is allow members to increase their maximum housing loan limit. This scheme is essentially a financing product in collaboration with banks. Maybank and Public Bank have so far signedup for the scheme. Members could transfer part of their savings under Account 2, which is utilised to buy a house or reduce a housing loan, to the Flexible Housing Withdrawal account or Account 11, followed by a monthly transfer of a specified amount of contribution.
Besides EPF members' existing monthly income, Account 11 (both existing sum and future contribution) provides additional source to repay housing loan. However, Account 11 is only "set aside" for such purpose with no actual withdrawal taking place, and the amount is also not "pledged" to the banks. On top of that, EPF members will continue to earn dividends on Account 11. Only EPF members who have not withdrawn their savings under Account 2 to purchase a house or reduce a housing loan can participate in the Flexible Withdrawal Scheme.
Although we are disappointed that the new scheme falls short of our expectation of an actual withdrawal similar to that adopted by Singapore's Central Provident Fund, the new scheme is still a positive for the property sector especially among first time home buyers. However, how much the scheme will improve home buyers affordability will depend on the quantum of additional loans which can be taken from banks. This is not quantifiable at this juncture as our checks with both Maybank and Public Bank revealed that none of their credit officers at branch level have received any internal guidelines on the implementation of this new scheme yet.
Acquisition news
July continued to see a number of property players expanding through acquisitions as well as joint venture. Some of the notable ones are as follow:
- Mah Sing is on an acquisition trail again as it secured 4 new landbanks last week which added RM1.2bn GDV. It started off on Monday with a JV with Mahajaya for the development of a 13.2-acre land in Kinrara with GDV of RM100m and JV entitlement of RM35.4m to Mahajaya. By Friday, Mah Sing announced the acquisition of 3 more land parcels with aggregate land cost of RM276m and GDV of RM1.1bn, including a 125.8-acre land in Kinrara from Mahajaya which is disposing its landbank in order to pare down borrowings. Two other land parcels are located adjacent to Rubber Research Institute Land and Bukit Jelutong.
- Bandar Raya has taken over from Dubai World, an investment arm of the Dubai government, a joint-venture agreement with UEM Land to undertake the RM2.3bn Residential North high-end mixed development in Puteri Harbour. Bandar Raya will have a 60% stake in the 111-acre development while UEM Land owns the remaining 40% stake.
- Gamuda revealed that its property unit has acquired a 2.94-acre freehold plot along Jalan Pudu for RM105m or RM820 psf. The construction and property group plans to develop a mixed commercial project comprising shop offices and serviced apartments with an estimated GDV of RM600m.
- Multi-Purpose which has recently stated that it will form a partnership with listed property developer to develop its landbank has announced last week that it had entered into three memorandums of understanding (MOU) with Bandar Raya Developments to collaboratively develop several parcels of land in Penang (80 acres), Rawang (267 acres) and Gombak (324 acres). A feasibility study will be conducted within six months on all the proposed projects.
- Axis REIT announced three potential assets that are worth about RM190m for acquisitions. These assets comprise of (1) two units of new logistics warehouses in Johor, (2) a retail warehousing in Johor, and (3) an office building in Cyberjaya. Axis REIT also has proposed a placement of 68.81m units to raise RM132m to pare down borrowings as part of its capital management process and also to fund the trust for asset acquisitions.
- CapitaMalls Malaysia Trust (CMMT) which was listed on 16 July will potentially see the injection of Gurney Plaza Extension after it announced that Gurney Plaza Sdn Bhd, the vendor of the property, has exercised a put option requiring CapitaMalls Asia Ltd to purchase Gurney Plaza's nine-storey extension block for RM215m by 15 Apr 2011. CMMT has a right of first refusal to acquire Gurney Plaza Extension from CMA.
Other notable property news
There were two notable property launches in July. First was Mah Sing's Icon Residence Mont' Kiara, a condominium project located in Jalan Duta, KL which has a 70% take-up rate from the launch of its first block at average selling price of RM1,200 psf on a semi-furnished basis. The second was UEM Land's maiden project in the Klang Valley, Symphony Hills which is located in Cyberjaya and has a GDV of RM1bn.
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 like mid-cap property stocks such as Sunway City and Sunrise due to more compelling valuations. We also like Mah Sing among non-rated property stocks.
The KL Property Index gained 8.2% in July as the property sector which has lagged behind the broad market in 1H10 took centre stage. There has been rotational play on Iskandar Malaysia property stocks first which was followed by Penang property stocks. Some notable gainers during the month include UEM Land, Plenitude, KSL and E&O. Penang-based property developer Ivory Properties also made a strong listing debut on 28 July, rising by 36.0%. It ended the month 37% higher. On major shareholding changes, July saw net accumulation in SP Setia, Sunrise, YNH Property and Glomac.
· EPF introduces Flexible Withdrawal Scheme
The long-awaited new housing withdrawal scheme in the shape of “Flexible Withdrawal Scheme” has been implemented from 1 August. Its name is a bit of a misnomer though since it does not involve any physical withdrawal. The scheme allows members to increase their maximum housing loan limit by transferring part of existing Account 2 and future contributions into Account 11 which acts as a comfort to participating banks in granting housing loans of higher limit to EPF members. Although we are disappointed that the new scheme falls short of our expectation of an actual withdrawal, it is still a positive for the property sector especially among first time home buyers. However, how much the scheme will improve home buyers affordability will depend on the quantum of additional loans which can be taken from banks. This is not quantifiable at this juncture as our checks with participating banks revealed that internal guidelines have not been circulated yet.
· Other notable property news
We continued to see steady news flow on acquisitions as well as joint ventures. Notable transactions during the month involve Mah Sing, Bandar Raya, Gamuda, Multi-Purpose, Axis REIT and CapitaMalls Malaysia Trust.
July also saw notable new property launches by Mah Sing (Icon Residence Mont’ Kiara) and UEM Land (Symphony Hills).
· 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 like mid-cap property stocks such as Sunway City and Sunrise due to more compelling valuations. We also like Mah Sing among non-rated property stocks.
The KL Property Index gained 8.2% in July as the property sector which has lagged behind the broad market in 1H10 took centre stage. There has been rotational play on Iskandar Malaysia property stocks first which was followed by Penang property stocks. Some notable gainers during the month include UEM Land (+16.4%), Plenitude (+28.7%), KSL (12.2%) and E&O (+31.1%). Penang-based property developer Ivory Properties also made a strong listing debut on 28 July, rising by 36.0%. It ended the month 37% higher.
On major shareholding changes, July saw net accumulation in SP Setia, Sunrise, YNH Property and Glomac. Skim Amanah Saham Bumiputra added 2.0m shares in SP Setia, while Employees Provident Fund (EPF) added 0.4m and 0.1m shares in SP Setia and Sunrise respectively. Tan Sri Dato' Tan Chee Sing also added 1.2m shares in Sunrise. Dato' Dr. Yu Kuan Chon continued to support YNH Property with accumulation of 0.6m shares. Of interest was the transfer of 10m shares in Glomac by Tan Sri Dato' Mohamed Mansor to his son, Dato' Fateh Iskandar. Datuk Richard Fong also added 0.1m shares in Glomac.
EPF introduces Flexible Withdrawal Scheme
EPF CEO Tan Sri Azlan Zainol announced on 29 July the introduction of Flexible Withdrawal Scheme to enable EPF members to qualify for higher property loans. Recall that the Prime Minister has announced during Budget 2010 last year that EPF will launch a new housing withdrawal scheme to boost housing affordability in January 2010. The Flexible Withdrawal Scheme, which is effective from 1 August, is bit of a misnomer as it does not involve the withdrawal of EPF savings for purchase of residential property. What it does do is allow members to increase their maximum housing loan limit. This scheme is essentially a financing product in collaboration with banks. Maybank and Public Bank have so far signedup for the scheme. Members could transfer part of their savings under Account 2, which is utilised to buy a house or reduce a housing loan, to the Flexible Housing Withdrawal account or Account 11, followed by a monthly transfer of a specified amount of contribution.
Besides EPF members' existing monthly income, Account 11 (both existing sum and future contribution) provides additional source to repay housing loan. However, Account 11 is only "set aside" for such purpose with no actual withdrawal taking place, and the amount is also not "pledged" to the banks. On top of that, EPF members will continue to earn dividends on Account 11. Only EPF members who have not withdrawn their savings under Account 2 to purchase a house or reduce a housing loan can participate in the Flexible Withdrawal Scheme.
Although we are disappointed that the new scheme falls short of our expectation of an actual withdrawal similar to that adopted by Singapore's Central Provident Fund, the new scheme is still a positive for the property sector especially among first time home buyers. However, how much the scheme will improve home buyers affordability will depend on the quantum of additional loans which can be taken from banks. This is not quantifiable at this juncture as our checks with both Maybank and Public Bank revealed that none of their credit officers at branch level have received any internal guidelines on the implementation of this new scheme yet.
Acquisition news
July continued to see a number of property players expanding through acquisitions as well as joint venture. Some of the notable ones are as follow:
- Mah Sing is on an acquisition trail again as it secured 4 new landbanks last week which added RM1.2bn GDV. It started off on Monday with a JV with Mahajaya for the development of a 13.2-acre land in Kinrara with GDV of RM100m and JV entitlement of RM35.4m to Mahajaya. By Friday, Mah Sing announced the acquisition of 3 more land parcels with aggregate land cost of RM276m and GDV of RM1.1bn, including a 125.8-acre land in Kinrara from Mahajaya which is disposing its landbank in order to pare down borrowings. Two other land parcels are located adjacent to Rubber Research Institute Land and Bukit Jelutong.
- Bandar Raya has taken over from Dubai World, an investment arm of the Dubai government, a joint-venture agreement with UEM Land to undertake the RM2.3bn Residential North high-end mixed development in Puteri Harbour. Bandar Raya will have a 60% stake in the 111-acre development while UEM Land owns the remaining 40% stake.
- Gamuda revealed that its property unit has acquired a 2.94-acre freehold plot along Jalan Pudu for RM105m or RM820 psf. The construction and property group plans to develop a mixed commercial project comprising shop offices and serviced apartments with an estimated GDV of RM600m.
- Multi-Purpose which has recently stated that it will form a partnership with listed property developer to develop its landbank has announced last week that it had entered into three memorandums of understanding (MOU) with Bandar Raya Developments to collaboratively develop several parcels of land in Penang (80 acres), Rawang (267 acres) and Gombak (324 acres). A feasibility study will be conducted within six months on all the proposed projects.
- Axis REIT announced three potential assets that are worth about RM190m for acquisitions. These assets comprise of (1) two units of new logistics warehouses in Johor, (2) a retail warehousing in Johor, and (3) an office building in Cyberjaya. Axis REIT also has proposed a placement of 68.81m units to raise RM132m to pare down borrowings as part of its capital management process and also to fund the trust for asset acquisitions.
- CapitaMalls Malaysia Trust (CMMT) which was listed on 16 July will potentially see the injection of Gurney Plaza Extension after it announced that Gurney Plaza Sdn Bhd, the vendor of the property, has exercised a put option requiring CapitaMalls Asia Ltd to purchase Gurney Plaza's nine-storey extension block for RM215m by 15 Apr 2011. CMMT has a right of first refusal to acquire Gurney Plaza Extension from CMA.
Other notable property news
There were two notable property launches in July. First was Mah Sing's Icon Residence Mont' Kiara, a condominium project located in Jalan Duta, KL which has a 70% take-up rate from the launch of its first block at average selling price of RM1,200 psf on a semi-furnished basis. The second was UEM Land's maiden project in the Klang Valley, Symphony Hills which is located in Cyberjaya and has a GDV of RM1bn.
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 like mid-cap property stocks such as Sunway City and Sunrise due to more compelling valuations. We also like Mah Sing among non-rated property stocks.
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