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Property: Back with a bang
Overweight
UOB Kay Hian Research |
August 7
WE maintain our 'overweight' stance on the property sector as we continue to see good value in property stocks.
The residential property cycle has turned up and property stocks are still trading at an attractive 32 per cent discount to the average up-cycle price-to-book (P/BV) value despite the recent run-up in share prices. Developer sales volume of 4,714 units in Q2 2009 alone exceeded the 4,370 units sold for the whole of 2008. Price levels rebounded by 5-8 per cent q-o-q in Q2 2009 after a 30-40 per cent fall from end-2007 peak levels. We expect prices to firm up by another 8-10 per cent during H2 2009. Thereafter, prices are likely to rise in tandem with economic growth.
Interest rates are drastically low in comparison to that during the Asian financial crisis. Net household wealth is double that in 1997 and household debt-to-asset ratios are at a 10-year low. Top picks: Allgreen Properties, City Developments, Ho Bee Investment, Wheelock Properties. Analysis of the past three upcycle P/BV multiples suggests 52 per cent upside potential for the sector.
Neptune Orient Lines (NOL)
Buy
Citi Investment Research | August 7 Close: $1.64
LOOKS well-positioned to last the long winter: Results re-affirm our view that Q1 2009 represented peak losses and the beginning of a slow, but nevertheless painful recovery. Despite a reduction in revenues, a smaller sequential loss was reported mainly due to continued cost reduction efforts. While we recognise the industry's challenges (shaky global consumption, large inventory overhang, vessel overcapacity), we believe risks lie to the upside: 1) industry supply rationalisation continues with NOL observing increased signs of future orderbook at risk of delays and cancellations; and increase in scrapping; 2) rates appear to have bottomed; 3) minimal impact from higher bunker costs as bunker recovery is factored into Asia-Europe and Intra-Asia 'all-in' rates and costs also hedged. Maintain 'buy', target price $2.
Compiled by Jamie Lee
Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.
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