Developers achieve 44% of sales target as of 1H19, says HLIB

HLIB’s 2Q19 results show 5 out of 8 companies under its coverage came in within expectations, while 3 performed below expectations

by FARA AISYAH/ pic credit:

PROPERTY developers under Hong Leong Investment Bank Bhd’s (HLIB) coverage achieved 44% of their sales target for the year in the first six months of 2019.

The companies under its coverage include — SP Setia Bhd, Sunway Bhd, IOI Properties Group Bhd, UEM Sunrise Bhd, Mah Sing Group Bhd, Matrix Concepts Holdings Bhd, MB World Group Bhd and Ibraco Bhd.

In the second quarter of 2019 (2Q19) results season, five out of the eight companies under its coverage came in within expectations, while three performed below expectations.

“For the disappointments, Mah Sing and Ibraco fell short due to lower than expected progressive billings and margin product mix, while IOI Properties reported a higher than expected effective tax rate,” HLIB said in a note yesterday.

The investment bank expects sales to pick up as most planned launches will take place in the second half of 2019 (2H19) and will allow the companies to achieve their proposed targets.

HLIB added that monthly residential property loan applications and loan approvals increased by 10.4% and 12.4% year-on-year (YoY) respectively in the first seven months of 2019, showing an improved approval rate of 1.8%.

The residential transaction volumes in 1Q19 showed a growth of 7.5% YoY to 52,212 units, from 48,572 units in 1Q18, which mainly consists of houses priced below RM300,000.

“We expect these indicators to continue showing signs of slight growth in the near term, as it will be further supported by the Home Ownership Campaign (extended to December 2019) and the cut in the Overnight Policy Rate.

“Nonetheless, we continue to believe these improvements are insufficient to lift the overall market,” HLIB noted.

As such, HLIB maintains the ‘Neutral’ stance on the property sector, despite having five ‘Buy’ calls on the eight companies, due to the absence of near-term catalysts to warrant a broad-based re-rating in the sector overall.

The companies with ‘Buy’ calls include SP Setia, Sunway, IOI Properties, Matrix and MB World.

HLIB has ‘Hold’ calls on UEM Sunrise, Mah Sing and Ibraco, its research note yesterday stated.

“We continue to like Sunway as an underappreciated property construction conglomerate with mature investment properties, growing trading and quarry division, and potential listing of healthcare business,” it said.

MB World is its small-cap pick given its first mover advantage to capture the spillover effect from the growth in the refinery and petrochemical integrated development project in Pengerang and Desaru Coast, Johor.

HLIB, however, does not rule out a possible mild recovery in interest towards the sector given the valuations.


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