Property downgrade due to slower home sales

Slower residential home sales in the second half of this year have driven UOB Kay Hian to downgrade the local property sector.

It added that the anticipated property cooling measures have also contributed to this fall.

Downgrading the sector to “market weight” from “overweight”, the research house revealed that sales launches by property developers might have slightly reduced with average take-up rates of 50 percent to 65 percent compared to last year’s 80 percent to 90 percent.

It also noted there could be tightening measures on the sector, namely the loan-to-value ceiling at 70 percent for second mortgage, the re-launch of a real property gains tax (RPGT) and mortgage approval criteria based on net salary.

UOB Kay Hian also said that most companies were trading at a 10 percent to 20 percent discount of their corresponding revised net asset value (RNAV).

The research group is maintaining its “buy” calls on UEM Land (target price: RM2.68) and MRCB (RM3.02). The near-term catalysts for MRCB include the acquiring parcels of RRI Land in Sg Buloh and contract awards for phase 1 of River of Life.

On the other hand, UEM Land will continue to benefit from land price appreciation through Iskandar Malaysia’s materialisation.

Meanwhile, UOB Kay Hian recently downgraded Mah Sing to “hold” with a target price of RM2.51, while keeping a “hold” on SP Setia with a target price of RM4.

In addition, the research house is now reviewing the target price and noted that there could be more drawbacks if the market continues to fall.

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