PETALING JAYA: Several property developers, including UEM Land Holdings Bhd, SP Setia Bhd and Mah Sing Group Bhd, have embarked on fund raising and more developers are expected to do the same to raise their respective war chests.
According to RHB Research Institute Sdn Bhd, other developers which could need financing over the medium term include IJM Land Bhd, Sunway and Eastern & Oriental Bhd.
“But the fundraising would not be in the immediate term and we are comfortable with their purposes,” the research house added.
RHB Research expects fund raising exercises to happen over the medium term, which it said could be a better timing as the market stabilises post-general election.
“We also feel more comfortable given the financing purposes of these three companies. IJM Land is expected to use the proceeds mainly to fund its The Light Phase 2 commercial project in Penang, which is very marketable given the successful take-off of Light Linear, and funding requirement is mitigated as the company is also likely to tie up with strategic partners at project level for a 38-acre site,” the research house said. Sunway, on the other hand, will use the money mainly for the construction of its property investment assets over the next three to four years, which will be disposed of to the real estate investment trusts when they mature.
The key property assets are Sunway Pinnacle, Sunway Pyramid 3 and Sunway Velocity Mall, which are potentially worth a total gross development value of RM1.3bil-RM1.5bil.
As for E&O, money will be used mainly to fund the reclamation and development of Seri Tanjung Pinang 2. Last year, UEM Land issed RM600mil 5-year sukuk, 15% placement exercise for SP Setia to raise RM900mil to RM1bil as well as rights issue for Mah Sing to raise RM400mil.
RHB Research expects the likely correction for the property sector this round ahead of the election to be less drastic, as the previous selldown in early 2008 could also be partially led by the initial outbreak of the subprime crisis in the United States.
“We expect the physical property market to recover this year, supported by our analysis on population growth cycle and our gross domestic product growth forecast of 5.4% for 2013, as well as the influx of liquidity,” it said.
It added that foreign buying would be an additional boost to the overall market, as regional countries such as Hong Kong and Singapore continue to tighten measures to curb foreign property purchases.
The research house believes market sentiment would likely take precedence over the sector fundamentals in first quarter.
“We advocate investors to look for bargain-hunting opportunities when valuations become attractive. We prefer larger cap stocks such as IJM Land, UEM Land, Sunway and UOA.” - The Star
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