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Top Calls
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Sector Update � Property (NEUTRAL,
maintain)
- Resilient earnings, weaker sales The developers under our coverage reported higher 1HCY14 core net profit of RM840m (+5.5% yoy) on higher progress billing and higher sales of development land / investment properties. The sector results were largely within our expectations: 5 were in line and 1 was below (UOA). 1HCY14 property sales were 28% lower yoy at RM4.7bn due to weaker property market sentiment and a high base effect. Sequentially, sales increased by 5.3% qoq on more new launches and improved take-up rates. While the developers� 1H14 earnings were resilient, we forecast weaker 2015 sales and an ongoing margin squeeze to soften future earnings. That said, we opine that these negatives are largely priced in as the developer stocks now trade at fair valuations of 0.6-0.7x P/RNAV (except Tropicana), broadly within their historical trading ranges. Maintain NEUTRAL. Our top pick for the sector are Tropicana (BUY, TP RM1.83) and Sunway (ADD, TP RM3.30).
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Other Calls
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