THE Valuation & Property Services Department (VPSD) of the Finance Ministry had been quoted from a news report that the key takeaways of the VPSD's official view include that the Malaysian property market is expected to be sustained at a lower growth rate in 2013, with growth in the number of transactions to moderate.
According to the VPSD, residential properties in certain locations would still be able to see a price increase, and that overall, it expects property prices to moderate amid more houses up for sale this year.
At the same time, the managing director of CH Williams Talhar & Wong said measures by the government, such as an increase in the level of real property gains tax and a 70% loan-to-value ratio for third residential property, has had a psychological impact on buyers and was putting a brake on transactions.
It is difficult to quantify the financial impact, but the macro scenario is applicable to Malaysian developers across the board, in our view.
We are encouraged to note that the abovementioned points are largely in line with our house view of the key sector trends for 2013, namely moderation of overall launches and sales in 2013, property prices likely to hold steady and intensifying competition as successful developers will need to be more selective of projects where they can compete on affordability and pricing.
We continue to regard landbank location as the key driver. In this regard we favour Glomac Bhd, as it is well positioned for 2013 with its highly-successful flagship Lakeside development at Puchong, whilst offering a rare combination of value (5.6 times financial year 2013 estimated price-earnings ratio), 4.9% dividend yield and growth.
Meanwhile the risks include sharper than expected economic slowdown and sudden loss of holding power by Malaysian home-buyers leading to a spike in non-performing loans (NPL) ratios.
The positives include asset reflation theme remains intact; the affordable segment remains untapped and Johor to start outperforming after years of neglect and under-performance.
However, the negatives include slowdown in demand for mid or high end segment, banks exercising more restraint and prudence in processing applications and granting approvals.
Our top pick is Glomac as it still offers the growth element in addition to an attractive 4.9% dividend yield while trading at a mere 5.5 times financial year 2013 estimated price-earnings ratio, but liquidity remains lacking. We give it a buy call with a RM0.97 target price. - The Star
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