Wednesday, 17 December 2014

Malaysia's Mah Sing among Nomura top picks in Asean

PETALING JAYA: Property developers Mah Sing Group Bhd and Thailand’s Quality Houses (QH) are Nomura Research’s Asean property yield picks that are expected to offer above-average yields and dividend growth in 2015 and 2016. 

In a report on Asean property, it identified three out of the 28 property stocks, including 11 real estate investment trusts (Reits), that it covered which fulfilled two conditions. 

The conditions are that the stock’s 2015 forecast dividend yields would be higher than the market’s as well as the sovereign 10-year bond yield, and that the dividend per share (DPS) or unit (DPU) is projected to grow faster than the market in 2015 and 2016 forecasts.

It said that the report “aims to identify candidates amongst property stocks under our coverage in Asean for income-focused investors that are still looking for dividend yield ideas.”

Setting a RM3 target price for Mah Sing with a “buy” call, Nomura said its 2015 forecast yield was 5% versus the KLCI’s 3.6% and Malaysia’s 10-year bond yield of 4.2%. 

Additionally, it said Mah Sing’s forecast DPS for 2015 and 2016 were projected to grow 22.2% and 27.3% respectively, versus the KLCI’s 6.8% and 7.2% respectively.

“The projected growth in dividend is underpinned by unbilled sales of RM4.8bil, which should drive earnings to expand 22% (compound annual growth rate) over financial years 2013 to 2016 forecast,” it said.
As for QH, which has a target price of 4.40 baht and a “buy” call, Nomura said it had a projected 2015 forecast yield of 4.8% versus Stock Exchange of Thailand’s (SET) 3.4% and Thailand’s 10-year yield of 2.8%. 

Its DPS is projected to grow 12.5% and 16.7% in 2015 and 2016 versus the SET’s 11.4% and 12% respectively, underpinned by high earnings visibility due to resilient real demand for landed housing.

Nomura noted that Sunway Reit was its third stock that met the two conditions but retained its “neutral” call as it believed the robust DPU growth forecast in 2015 and 2016 was already largely reflected in the unit price. 

It also noted that none of the Singapore Reits it covered managed to qualify on account of overall pedestrian DPU growth in 2015 and 2016 forecasts (average 1.5% to 1.6%).

Meanwhile, RHB Research downgraded the Malaysian property sector to “neutral”, expecting property transaction volumes to decline 3% to 5% in 2015 on the back of slower economic growth and a high loan rejection rate.
It also anticipated 
property prices to remain flat as developers would have difficulty passing on incremental costs during weakening demand, while all parties would be likely to adopt a wait-and-see stance as the impact of the goods and services tax kicked in. 

“For the stocks under our coverage, we estimate new sales to drop by an average 10% to 20% year-on-year (y-o-y) versus -25% y-o-y in 2014 and +41% y-o-y in 2013,” it said. 

RHB Research maintained “buy” on Tambun Indah Land with a reduced target price of RM2, noting that affordable housing players should fare better while the company’s fundamentals remained solid with zero gearing.

It downgraded Eastern & Oriental, UEM Sunrise and UOA Development to “neutral” with respective target prices of RM2.27, RM1.65 and RM1.84 respectively. 

It downgraded Glomac to “sell” with a lower target price of 88 sen (6.5% downside), as it believed management’s 2015 (April) new sales target of RM504mil was a tall order given new launches would likely be delayed into the first quarter.
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