■ Singapore and Philippines better placed, while Indonesia may be a swing factor; we are also more constructive on SREITs
■ Easing of property-related measures is an emerging theme
■ Valuation is generally attractive; focus on stocks where catalysts could emerge or growth remains supportive
Property stocks in Singapore and Philippines remain better placed; we are also more constructive on SREITs
We are sticking with our preference for Philippines and Singapore property stocks, though we are marginally more positive on Singapore for the upcoming year given increased prospects of policy rationalisation (should benefit Singapore developers) and a stronger valuation argument for SREITs. For Philippines, while developers’ growth prospects have moderated (given supply outlook), we believe positive macro drivers for the country should continue to support valuations of well-run companies.
Easing of property-related policy measures is an emerging theme
Given slowing economic growth and prospect of higher interest rates there is increased pressure on policy makers across the region to ease property-related policy measures. While a shift in policy stance may provide some reprieve, we are sceptical if it will be sufficient to re-ignite property market activity barring in Singapore (and possibly in Indonesia if substantial initiatives are pushed through).
Focus on stocks where catalysts could emerge or growth remains supportive
Valuation multiples (PB) have pulled back – for ASEAN developers’ c30-40% lower and for SREITs c20% lower from May 2013 levels – and well below historical averages for some markets (notably in Singapore – 43% lower than historical average of 1.20x). From a bottom-up perspective, many stocks under our coverage offer good upside. We suggest focusing on stocks where catalysts could emerge (Singapore, given increased odds of policy rationalisation) and where growth remains supportive (Philippines). We prefer CIT SP, CAPL SP, CCT SP, FEHT SP, KREIT SP, ALI PM and PS TB. Risks for the sector are higher rates and weaker currencies. (Read Report)
Source : HSBC Global Research