RHB Research Overweight on property sector


KUALA LUMPUR: RHB Research is maintaining its Overweight rating on the property sector and its top picks are Sunway, Tambun Indah and Matrix Concepts.

It said on Tuesday concerns over an interest rate hike should have largely been priced in.

“We expect a stronger GDP growth in 2014 and the front-loading of big-ticket items to drive a stronger demand recovery in 2H. Mega infrastructure projects will be the wild card to boost the sector further,” it said in its sectoral outloook.

RHB Research said concerns about the interest rate hike have been largely priced in.

Since its sector upgrade in end-March, the Kuala Lumpur Property index has appreciated by 7.4%. The rally was stronger in April, but it fizzled out when worries over an interest rate hike emerged in May.

“We believe the impact has already been priced in, and a 25 basis points hike in July or September should be manageable for the property market, asthis may raise monthly mortgage installment by only about 3%,” it said.

RHB Research expects a stronger demand recovery in 2H. While the rush to buy properties has yet to be seen, it believes marginal property buyers and investors are likely to buy properties towards late 2014 to avoid paying the 6% goods and services tax (GST) which will take effect from 1 April 2015.

Meanwhile, the research house has started seeing an uptick in banking system property loan approvals since late 1Q14, pointing to a gradual recovery in property sales in 2Q.

It expects more news flow on the highly-anticipated infrastructure projects in 2H, such as the MRT Line 2 & 3 and high speed rail link.

The research house believes the positive impact of both projects would be more significant in the Klang Valley region, as better connectivity and the relatively cheap property prices in Kuala Lumpur will likely lure more Singaporeans over, given the ease of travelling.

“We continue to like the Penang growth story and anticipate more news flow in the upcoming months.

“In line with our expectations, the JV deal between Penang Development Corp and Temasek to develop a business process outsourcing hub as well as the endorsement for Seri Tanjung Pinang 2 (STP2) master plan were announced in 2Q. The tenders for the proposed golf course and theme park projects are expected to be awarded in 2H, which could prompt another round of RNAV re-rating for the Penang mainland players. Tambun Indah is the key beneficiary.

“Our Top Picks are Sunway, Tambun Indah and Matrix Concepts. Following the privatisation of IJM Land, the M&A angle could potentially spice up the sector. SP Setia is a likely candidate,” said RHB Research.


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