KUALA LUMPUR: Kenanga Investment Research is downgrading property developers to Neutral from Overweight on potential worse-than-expected Budget 2013 risks and the closing general elections timeline.
The research house said on Thursday that first, high up on its list of fears are hikes in buyers stamp duties, although it reckoned this measure is unlikely.
“We think RPGT hikes are likelier, but this will have less physical impact on developers as the heftiest hike tends to be during the first 2-3 years holding period, that is during the construction period,” it said.
Kenanga Research said notwithstanding, sentiment will still be affected and it anticipates a near-term knee-jerk reaction on developers' share prices in this scenario.
“Even then, we still expect the physical market to continue in its current momentum given a liquid banking sector and attractive rates. As it is, most developers are meeting their sales target, except for UEM Land, which is another reason for our sector downgrade as we are cutting UEM Land recommendation,” it said.
The research house said although it is bullish on Johor, there is a high risk of UEM Land not meeting headline KPIs as it is now proportionately behind its sales targets.
“Our sector downgrade involves us re-basing most of our discount basis to widen our FD SoP RNAV discount rates to reflect our near-term cautiousness, although it is worth to note that on the positive side, most developers under our coverage are already approaching their forward PBV trough levels.
“We are downgrading our ratings and TPs on UEM Land (MP; TP: RM1.85) and Hunza Properties (UP; TP: RM1.50). We are maintaining our ratings but trimming our TPs on IJMLAND (OP; TP: RM2.60), Crest Builder (OP; TP: RM1.34), SPSETIA (MP; TP: RM3.80) and MAHSING (MP; TP: RM2.40).
“Our 4Q12 Top Pick is UOA Development (OP; TP: RM2.30) because of its strong net dividend yields of 7.6%-6.9% and its ability to meet its dividend commitments,” said Kenanga Research.
By The Star