Stock Name: MAHSING
Company Name: MAH SING GROUP BHD
Research House: RHB
Property sector
Maintain overweight: Despite having a good run-up in 2H10, the sector still has legs for further upside. After the major change in the industry dynamics in November last year, we believe the following three factors will continue to support the performance of the sector: (i) better liquidity for the sector post mega-mergers ' market cap of the top four property companies (UEM Land-Sunrise, Suncity-Sunway, S P Setia and IJM Land) would amount to more than RM20 billion (a 15% to 20% increase), and the share base would also be much larger; (ii) M&A activities will continue ' there will be continued speculation on PNB merging its property assets given the buoyant market environment; and (iii) privatisation of government land will drive news flow for the year as the drafting of plans is expected to be completed in 1H11.
We were correct to advise investors to take positiona in large-cap developer stocks in 4Q10. Going forward, before the completion of the mergers, which normally take about six months, we expect small mid-cap developers to catch up to narrow the valuations gap, as share prices of some companies with M&A are likely to be capped by their offer price. On average in 4Q10, price-earnings ratios for the bigger cap stocks (S P Setia, IJM Land, Sunrise and Suncity) have expanded by five to seven times, mainly accelerated by the M&A announcements (except for S P Setia and IJM Land recently). Smaller caps' PERs, on the other hand, are largely unchanged over the same period of time. Based on the current undemanding valuations, we see good value in some of the quality small mid-caps, such as Mah Sing Bhd, KSL Holdings Bhd and Glomac Bhd.
Apart from the catalysts mentioned above, the fundamentals are still supportive for the property sector as a whole. These include: (i) demand growth led by young population growth, which we expect to taper off only in 2012/13; (ii) expectation of a delay in interest rate hike by Bank Negara Malaysia in 2011; and (iii) offering of incentives by developers that help lower the entry cost for a property. The possibility of another round of regulatory measures is low for now, after the of 70% loan-to-value cap took effect from Nov 3 last year.
Key risks are regulatory risks and country risks.
We rate the property sector 'overweight'. Our picks for the year are S P Setia ('outperform', fair value = RM6.95) and IJMLD (OP, FV = RM3.50) for big caps; and KSL (OP, FV = RM2.78) and Mah Sing (OP, FV = RM2.50) for small mid-caps. ' RHB Research, Jan 5
This article appeared in The Edge Financial Daily, January 6, 2011.
Company Name: MAH SING GROUP BHD
Research House: RHB
Property sector
Maintain overweight: Despite having a good run-up in 2H10, the sector still has legs for further upside. After the major change in the industry dynamics in November last year, we believe the following three factors will continue to support the performance of the sector: (i) better liquidity for the sector post mega-mergers ' market cap of the top four property companies (UEM Land-Sunrise, Suncity-Sunway, S P Setia and IJM Land) would amount to more than RM20 billion (a 15% to 20% increase), and the share base would also be much larger; (ii) M&A activities will continue ' there will be continued speculation on PNB merging its property assets given the buoyant market environment; and (iii) privatisation of government land will drive news flow for the year as the drafting of plans is expected to be completed in 1H11.
We were correct to advise investors to take positiona in large-cap developer stocks in 4Q10. Going forward, before the completion of the mergers, which normally take about six months, we expect small mid-cap developers to catch up to narrow the valuations gap, as share prices of some companies with M&A are likely to be capped by their offer price. On average in 4Q10, price-earnings ratios for the bigger cap stocks (S P Setia, IJM Land, Sunrise and Suncity) have expanded by five to seven times, mainly accelerated by the M&A announcements (except for S P Setia and IJM Land recently). Smaller caps' PERs, on the other hand, are largely unchanged over the same period of time. Based on the current undemanding valuations, we see good value in some of the quality small mid-caps, such as Mah Sing Bhd, KSL Holdings Bhd and Glomac Bhd.
Apart from the catalysts mentioned above, the fundamentals are still supportive for the property sector as a whole. These include: (i) demand growth led by young population growth, which we expect to taper off only in 2012/13; (ii) expectation of a delay in interest rate hike by Bank Negara Malaysia in 2011; and (iii) offering of incentives by developers that help lower the entry cost for a property. The possibility of another round of regulatory measures is low for now, after the of 70% loan-to-value cap took effect from Nov 3 last year.
Key risks are regulatory risks and country risks.
We rate the property sector 'overweight'. Our picks for the year are S P Setia ('outperform', fair value = RM6.95) and IJMLD (OP, FV = RM3.50) for big caps; and KSL (OP, FV = RM2.78) and Mah Sing (OP, FV = RM2.50) for small mid-caps. ' RHB Research, Jan 5
This article appeared in The Edge Financial Daily, January 6, 2011.
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