SECTOR FOCUS OF THE DAY
Property Sector: Affordable housing still in focus NEUTRAL
We have a NEUTRAL stance on the property sector over the next 12 months. We believe the change in the political landscape post-GE14 ( the 14th general election) will have limited impact on the sector as a whole as various key challenges remain, including: (1) the generally still elevated home prices; (2) the low loan-to-value (LTV) or financing margin offered by banks; (3) rising interest rates (with OPR expected to rise to 3.5% in 2019 from 3.25% currently); (4) the weak job security in selected industries; and (5) house buyers' inability to qualify for a home mortgage due to their already high debt service ratios (DSR).
Pakatan Harapan in its GE14 manifesto spoke of “the construction of one million affordable housing units over its two terms in administration”, a rent-to-own scheme for the low-income group (B40) and middle-income group (M40) and the provision of affordable rented homes for young people. In short, we believe affordable housing will still be the key focus in the property sector at least over the next 12-18 months.
We are mindful that affordable housing typically commands low margins. We believe the investment case for an affordable housing developer only holds water if the developer is able to sell affordable houses in large quantities, has access to highly cost-effective and speedy construction methods, and most importantly, has the ability to secure strategic landbank with a high plot ratio at cheap prices. Our top picks for the property sector are Sunway (BUY, FV: RM1.99) and Titijaya (BUY, FV: RM0.73) while our top pick for the REIT sector is YTL REIT (HOLD, FV: RM1.32).
Others:
Telekom Malaysia: TM Global expands into Dubai BUY
Banking: 1Q18 Earnings Review: Keeping pace with expectations OVERWEIGHT
QUICK TAKE
Tune Protect: Acquiring 9.99% stake in insurtech company Laka BUY
RETAIL RESEARCH
Stocks On Radar: Handal Resources, Luxchem, YTL Corporation, Chin Hin
ECONOMIC HIGHLIGHT
US – Will Fed hike rates in June?
NEWS HIGHLIGHTS
Local Bourse: Rejuvenation of ‘monster’ GLCs sparks optimism
CCM Duopharma: Gets loan to buy stake
Axis REIT: Buys industrial properties in Iskandar M’sia for RM38.7m
Hartalega: Launches antimicrobial glove
DISCLAIMER:
The information and opinions in this report are prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.
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