RHBInvest Research

Property: – Outlook and concerns

UEM Land , SP Setia, IJM Land and KSL are confident in their property sales this year with more new launches scheduled in the pipeline.

Rising building material costs such as steel bar, cement as well as the shortage of labours are key concern.

UEM Land: Correlation between ULHB’s foreign shareholding and share price is 0.94. Hence, any short-term capital reversal would result in relatively strong profit taking activities on the stock. However, continuous news flow on IDR will keep investors’ interested on the stock. If we include the contribution from potential development of Singapore land parcels, RNAV/share is estimated at RM3.05.

IJM Land: A total of about RM2bn worth of new launches is scheduled for this year. Unbilled sales have risen from about RM800m to almost RM1bn. While management has conservatively estimated a GDV of only RM4bn for Canal City , we believe the actual GDV could amount to RM9-10bn.

SP Setia: Closed about RM1bn sales from KL EcoCity project – 10 blocks of boutique offices and over 90% of strata office units were booked. In addition to the unbilled sales of RM2.4bn, given the RM7-8bn worth of new projects in the pipeline, RM3bn sales target seems to be rather modest. Meanwhile, continued news flow on landbanking will provide some support to the share price.

KSL – Estimate that total value of all assets could amount to RM700-800m – similar to its current market cap. Although the delay in obtaining approval for Bandar Bestari could yield some earnings risk, the stock’s underlying asset are still under-estimated by the market

IRDA – Following the bilateral agreement between Malaysia and Singapore governments, increased interest from China is particularly strong on hotels and resorts business. Total investment from Singapore is now about S$2bn. Note that for Temasek and other developers from Singapore to enter, this suggests that the Singaporeans are confident on the potential of IDR, which will then lead to value appreciation for the real estate and properties in Johor.

Maintain Overweight. Top picks are SP Setia, IJMLD, Mah Sing (fair value is upgraded to RM3.03) and KSL. Considering the current valuations of the sector, we see better values in the small-mid cap property stocks such as Mah Sing and KSL which are trading at 15.7x and 8x FY11 PE, respectively.



Sime Darby:

• Lawsuit from Emirates International Energy Services (EMAS) asking for nearly US$200m in damages, stemming from a dispute over tender bids.
• No change to forecasts, target price of RM11.10 and our Outperform call.