PETALING JAYA: The Malaysian property sector will remain "overweight" for the third quarter of the year with key drivers being stronger gross-domestic-product (GDP) growth for 2014 and upcoming infrastructure developments, said RHB Research.
People looking at a model of a housing project during a property fair in Penang last month. RHB's analysts said their regional key stock ideas were Malton Bhd and Indonesia's Modernland.
Its analysts said the third key driver was the front-loading of big-ticket items ahead of the implementation of the 6% goods and services tax (GST) in April 2015.
Maintaining their sector rating, the analysts said concerns of a rate hike should have already been discounted by the market.
"In line with our expectations, property sales generally recovered from the first quarter. The weak second-quarter results were not a surprise as developers typically report stronger earnings in the second half," they said in a regional real estate research report yesterday.
RHB's analysts said their regional key stock ideas were Malton Bhd and Indonesia's Modernland.
They said Malton would enter a new phase of earnings growth, with its financial year 2015 (FY15) earnings set to be underpinned by RM470mil unbilled sales and RM410mil construction contract value.
Adding that Malton had a compelling re-rating angle, they said that its Bukit Jalil City project would be a major turning point while new launches this year would drive FY16 earnings.
RHB Research's top buys for the Malaysian property market are Sunway at a fair value of RM3.60, Tambun Indah (RM3) and Matrix Concepts (RM3.80).
Maintaining its "neutral" sector rating on Indonesia, the analysts said demand for mid-range property priced in the 500 million rupiah to below 2 billion rupiah per unit range would remain robust.
With an increase in debt level, they expect changes in capital structure as new mortgage regulations could impact the collection period/cashflow.
RHB Research also maintained its "overweight" call on Singapore, with the REITs sector outperforming the broad market as it provided a total return of 13.5% against the Straits Times Index's total return of 7.9% on a year-to-date basis.
Its analysts continue to see an upcycle trend within the sector given favourable demand-supply dynamics within subsectors such as commercial, retail and industrial.
Following a 30% quarter-on-quarter rebound in second-quarter results and a 58% surge in presales, RHB Research has upgrade its sector call on Thailand to "overweight" from "neutral".
Its analysts said growth drivers included stronger forecasted GDP growth, less stringent lending measures from mid-2014, a low interest rate environment with a policy rate of 2%, and a a 20% higher budget for the nationwide infrastructure plan worth 2.4 trillion baht.
Meanwhile, they expect the property oversupply issue in Hong Kong to worsen in the second half as developers generally have 20-30% more saleable projects to be launched.
Imposing a "neutral" call on the sector, they said the China developers came out with disappointing interim results, adding that margins were down while net gearing and inventories were high.
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