THE DOOR TO ASEANPROPERTY
Which countries offer the Should an investor buy What if the cost of best potential to play real property equities or physical capital rises? estate? assets?
THIS REPORT HAS BEEN PREPARED BY MAYBANK KIM ENG RESEARCH. SEE PAGE 137 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Co. Reg No: 198700034E MICA (P) : 099/03/2012 March 2018 This page is intentionally left blank THE DOOR TO ASEAN PROPERTY
ASEAN’s current economic stage, marked by growth We think Vietnam has the most compelling On the flip side, e-commerce is already exacting a Sadiq Currimbhoy with contained inflation, would ordinarily warrant investment proposition. Owning a better home toll on retailers, even though online sales are Regional Head of bullishness on the property sector. But this doesn’t remains a core ASEAN aspiration. Listed developers nascent in ASEAN. Mall rentals are fast softening and Research necessarily apply to all countries. service only the top deciles of households in vacancy rates are rising. Indonesia, the Philippines and Vietnam. This In “The Door to ASEAN Property”, we evaluate suggests to us that upgrade demand is set to persist Finally, a key risk is the rise in the cost of capital. property as a creator of wealth. Our property for some time. In Vietnam, Trung points to better From a debt-servicing and affordability perspective, analysts assess the risks and returns of property- affordability but also, some price dispersion. As a the team estimates that a 100bp rise in interest based assets and offer their best ideas. result, price anomalies can be capitalised on to rates may be absorbed. Romel estimates that every enhance returns from physical assets or even the 100 bps rise in interest rates will increase Broadly, property equities are preferred over stocks of small-medium sized listed developers. Philippine’s mortgage payments by 4.5-6%. Maria’s physical assets. This is largely due to constraints in ASEAN’s diversity means it’s not all about a young calculations show more stress for Thailand; debt- accessing the right physical-market segments, demographic. In Thailand, Maria considers the service ratio would increase to 33% for Bangkok and restrictions imposed on foreign purchases and proposition of managed-care homes in an ageing 43% nationwide. However, cap rates are also at transaction costs. Derrick demonstrates how buyers’ society, where IRRs can potentially exceed 13% historical lows for most property investment assets. stamp duties have changed the economics in against the benchmark policy rate of 1.5%. Residential cap rates in Makati CBD are 5%. But the Singapore to favour property equities over Philippine 10-year bond yield has risen from 4.6% in ownership or the development of physical assets. Within commercial, industrial properties are September last year to over 6% currently. As we The shift is rather momentous, since physical assets favoured by Indonesia, Malaysia and Singapore. enter a period of higher cost of capital and QE are illiquid, have higher barriers to entry and should Demand is increasingly springing from a new source, unwinding, there is likely to be pressure on returns. theoretically generate higher returns. Though namely technology-related investments. Su Tye While not forecast (see Appendix), a big risk would returns from equities are more volatile, valuation highlights that this includes demand for data be a major global bond sell-off that drives up the expansion should lift returns in the current cyclical centres - which are only in their infancy in cost of capital. recovery. Singapore – and warehousing & logistics facilities to support e-commerce.
March 2018
THE DOOR TO ASEAN PROPERTY 1 CONTENTS
1 FOREWORD 41 PHILIPPINES 79 THAILAND 42 INDIRECT ACCESS TO LOW END 80 EQUITIES THE SAFEST BET, WITH HOUSING VIA EQUITIES PROMISING RETURNS 47 LOCATION, LOCATION, LOCATION – 85 MANAGED CARE: A GROWING MANILA BAY AREA OF INTEREST 5 SINGAPORE 54 MIXED-USE PROPOSAL 89 NEW TOURISM INITIATIVE IN THE SOUTH 6 RISK-RETURN OF SINGAPORE ASSETS 7 EQUITY OVER PHYSICAL 20 INDUSTRIAL REITS ARE ALTERNATIVES TO LARGE SCALE INVESTMENTS 27 DATA CENTRES AN EMERGING INVESTMENT PROPOSITION 93 INDONESIA 32 E-COMMERCE THREAT? 94 LOW-END MASS HOUSING OPPORTUNITIES 102 RISING DEMAND FOR INDUSTRIAL LAND 104 SOFT CAP RATES FOR COMMERCIAL
59 VIETNAM 60 RESIDENTIAL VIA LISTED EQUITIES 70 RESIDENTIAL DEVELOPMENT IN DISTRICT 2 72 OFFICE DEVELOPMENT IN DISTRICT 2
2 109 MALAYSIA 127 APPENDIX 110 BUYERS’ MARKET? 127 PERFORMANCE & VALUATION TABLE 116 SILVER LINING, DIVERSIFICATION 129 ASEAN FORECAST TABLES 119 REITS AS AN ALTERNATIVE
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THE DOOR TO ASEAN PROPERTY 4 SINGAPORE Chua Su Tye (65) 6231 5842 [email protected], Derrick Heng (65) 6231 5843 [email protected]
EQUITIES OVER PHYSICAL
Positive on residential market. Low THE DOOR TO prospective returns when investing in physical properties due to stamp duties and leverage ASEAN PROPERTY limits. Switch from physical investments to equities.
INDUSTRIAL REITS ARE ALTERNATIVES TO LARGE SCALE INVESTMENTS
Invest in large-cap and liquid industrial REITs, with strong track records, clear growth attributes and substantial debt headroom to support acquisitions. We like AREIT for its quality, yields and growth prospects.
DATA CENTRES AN EMERGING INVESTMENT PROPOSITION
Data centres are a compelling concept, supported by strong demand and asset- conversion opportunities. REITs can also be proxies into this structural growth theme.
March 2018 5 RISK-RETURN OF SINGAPORE ASSETS SINGAPORE
Investment ideas:
Stamp duties and leverage Comparing risk-return of property investments 1. Positive on residential market. limits could shave 11ppt of returns when investing in physical properties. Switch from physical investments to equities. (5-year IRR, %)
15 2. Positive on industrial sector. Past peak supply with demand tilted towards business parks & high-specs. BUY AREIT. BS
3. Strong demand for data centres should support further AREIT conversions. The Tai Seng cluster, with its valuation 10 disparities, offers selective opportunities. REITs are available proxies. 100bp interest-rate hike will lower AREIT’s returns to 4% Cash, Industrial Bonds property
5 Residential development projects TAKEAWAY Completed residential BUY developer stocks and industrial REITs for 0 better returns than physical properties. 0 5 10 15 Opportunities in data-centre clusters. (COE, %)
Source: Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 6 EQUITIES OVER PHYSICAL POSITIVE ON SINGAPORE’S RESIDENTIAL MARKET SINGAPORE
Singapore’s Property Clock Slowing Economy, Singapore’s residential market is in a favourable quadrant with Falling healthy demand-supply dynamics, a strengthening economy and Interest rates still-low interest rates.
Rise Decline We forecast low net supply for 2018-19E. With demand outpacing slowing accelerating Demand supply, we expect home prices and rents to rise. > Supply Supply > Demand While interest rates are rising, they remain fairly low vs history. Home buyers are already stress-tested to a normalised rate of SG (retail) Rise Decline 3.5%, under Singapore’s Total Debt Servicing Ratio framework. accelerating slowing We expect home prices to be resilient to a 100bp rate hike. Strengthening Economy, Rising SG (resi) ● SG (hotel) Interest rates SG (office) ● SG (industrial)
Demand & supply of private residential market
(000) Net supply Net absorption 25 Low net supply in 2018-19E 20
15 TAKEAWAY
10 Singapore’s residential market is in a favourable 5 quadrant in the Property Clock. Home prices to 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E rise.
Source: Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 7 EQUITIES OVER PHYSICAL UPSIDE FOR HOME PRICES SINGAPORE
URA’s PPI Private home prices are in the early stages of a recovery. Prices (Index) URA PPI only started to pick up from 3Q17. 160 Long-term prices should rise along with GDP and wage growth. 140
120 Residential cap rates are low vs history. But yields could improve as rents recover from a low base. 100
80
60 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec-16 Dec-18 Dec-20
Source: URA, Maybank Kim Eng
Residential Cap Rates
(%) 4.0 3.5 Prime residential cap rate 3.5
3.0 TAKEAWAY 2.5 2.3 2.0 More upside for residential property prices.
1.5 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18
Source: CBRE, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 8 EQUITIES OVER PHYSICAL ENBLOC HOUSEHOLDS TO DRIVE INCREMENTAL DEMAND SINGAPORE
Residential enbloc deals We expect new-home sales to exceed 2017’s 10,700 this year. Some 5.3k households will be displaced after their enbloc sales. (000 units) Enbloc units New home sales They are a source of incremental demand. 25
2005-07 Singapore’s average household size has shrunk from 4 in 1995 to 20 2017-18 12.1k units, SGD21.5b 3.3 in 2017. 5.3k units, SGD14b 15 This supports household formation of 28k per year despite slow 10 population growth.
5
0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD18
Source: URA, Maybank Kim Eng
Household growth despite weak population expansion
(000) Household growth Resident Pop. growth Household size (RHS) 120 4.2 100 4.0 4.0 80 60 3.8 TAKEAWAY 40 20 3.6 Healthy demand for homes from enbloc 0 3.3 3.4 (20) households. (40) 3.2 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Singstats, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 9 EQUITIES OVER PHYSICAL HEALTHY AFFORDABILITY METRICS SINGAPORE
Home price-to-income ratio Home-price-to-income of 4.4x is low vs history. Affordable for (x) Mass-market private home price to income ratio 10Y average home occupiers. 6.5
6.0 Household income has increased almost 50% since 2009. With property prices down in recent years, we estimate that a typical 5.5 household now spends only 12% of its monthly income on 5.0 housing, down from 16% five years ago.
4.5 4.4 Despite recent increases in interest rates, mortgage servicing 4.0 ratio remains low at 16.8%.
3.5 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
Assumptions: Source: URA, Singstats, Maybank Kim Eng estimates 1,000 sf private homes in Outside Central Region. Mortgage servicing ratio 3rd decile of household income. 30 years of loan, 80% LTV and mortgage rate of 1% over 3M (%) Mass-market private mortgage servicing ratio 10Y average 30 SIBOR.
25
20 TAKEAWAY
16.8 15 Affordability metrics are healthy.
10 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
Source: Bloomberg, URA, Singstats, Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 10 EQUITIES OVER PHYSICAL RESILIENT TO A 100BP RATE HIKE SINGAPORE
Home-price-to-income ratio Assuming annual home-price increases of 5% and wage growth of (x) Home price-to-income ratio 10 year average 2013 peak 2009 trough 3%, home-price-to-income ratio in the mass market is 6.0 comfortably below its long-term average. 5.6 5.5 Even after factoring in a 100bp increase in mortgage rates, 4.9 mortgage servicing is within historical range. Home buyers are 4.8 5.0 4.7 4.6 already stress-tested to a normalised rate of 3.5%. 4.5 4.4 4.5 We expect home prices to be resilient to a 100bp rate hike.
4.0 4.2
3.5 Current Y1 Y2 Y3 Y4 Y5
Source: Maybank Kim Eng estimates
Mortgage servicing ratio
(%) Debt servicing ratio 10 year average 2006 peak 2009 trough 25
21.9
20 21.0 19.9 20.3 20.6 19.5 TAKEAWAY
15 16.8 14.3 Home prices should be resilient to a 100bp increase in mortgage rates. 10 Current Y1 Y2 Y3 Y4 Y5
Assumes 100bp hike in Y1 – Y5 Source: Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 11 EQUITIES OVER PHYSICAL WAGE GROWTH SUPPORTS THE PROPERTY MARKET SINGAPORE
Higher Household income, monthly 2009 2017 2017 vs 2009 household Household income has increased almost 50% since 2009. (SGD)(%) income Median household income 6,006 9,023 3,017 50 10k more residents with annual taxable income of >SGD0.5m a 1st - 10th 1,361 1,937 576 42 year since 2009. 11th - 20th 2,696 3,930 1,234 46 21st - 30th 3,787 5,805 2,018 53 Wage growth should support higher property prices. 31st - 40th 4,978 7,420 2,442 49 41st - 50th 5,980 9,331 3,351 56 51st - 60th 7,319 10,973 3,654 50 61st - 70th 8,798 13,505 4,707 54 71st - 80th 10,694 15,976 5,282 49 81st - 90th 13,423 19,589 6,166 46 91st - 100th 22,909 31,806 8,897 39 Average household income 8,195 12,027 3,832 47
Refers to Resident households. Including CPF. Source: Singstats, Maybank Kim Eng
Larger pool of Tax residents by income band 2009 2016 2016 vs 2009 high income ( ) ( )() earners 000 000 % SGD20-50k 473 776 303 64 SGD50-100k 336 554 218 65 SGD100-200k 141 264 123 87 SGD200-500k 61 111 50 82 TAKEAWAY SGD500k-1m 9.7 17.8 8.1 83 >SGD1m 3.6 5.5 1.9 53 Total 1,024 1,728 705 69 Wage growth supportive of higher property Source: IRAS, Maybank Kim Eng prices.
THE DOOR TO ASEAN PROPERTY 12 EQUITIES OVER PHYSICAL STRONG CASH PILE ON HOUSEHOLD BALANCE SHEET SINGAPORE
Cash on household balance sheet Huge cash surpluses on Singapore’s household balance sheet. Supportive of investment demand. (SGD b) Cash % of GDP (%) Investment demand weakened in recent years due to property- 450 100 cooling measures.
400 95 However, it remains sizeable at about half of total transactions.
350 90
300 85
250 80 200
75 150
70 100
50 65
0 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 60 TAKEAWAY Huge cash pile on the sidelines for potential investments. Source: Singstats, Bloomberg, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 13 EQUITIES OVER PHYSICAL COOLING MEASURES WEIGH ON RETURNS SINGAPORE
Additional Buyer’s Stamp Duty (ABSD) On top of buyers’ stamp duties that were raised recently, (%) Foreigners & Permanent Singapore property investors need to pay 7-15% of ABSD upfront. corporate entities Residents Citizens 20 Property investors can only leverage to a maximum of 50%, down 15 15 15 from 80% previously. 15 10 10 10 High transaction costs and leverage limits will weigh on returns 10 7 for investors. 5 5 0 0
Source: IRAS, MAS, Maybank Kim Eng
Five-year IRR for residential property investors
(%) 20
15.5 15 6.1 10 9.4 TAKEAWAY 2.7 6.8 5 2.6 4.2 15% ABSD and 30% lower leverage will shave 11ppts off returns. 0 80% LTV, b4 ABSD 50% LTV, b4 ABSD 50% LTV, 7% ABSD 50% LTV, 15% ABSD
Assuming property price appreciation of 5% pa. Source: Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 14 EQUITIES OVER PHYSICAL DEVELOPER STOCKS OUTPERFORM PHYSICAL IN UPCYCLES SINGAPORE
Stock prices vs physical property prices FSTREH URA PPI (RHS) Trading opportunities as stock-price movements amplify physical- (Index) (Index) market movements. 1,100 Trough-to-peak 160 Stocks +5.3x 150 Physical +1.6x Exposure to physical prices without hefty stamp duties and 900 140 illiquidity. 130 700 120 LTV: stocks: 0-70%, second residential properties: 20-50%. 110 500 Trough-to-peak 100 Stocks +2.3x 300 Physical +1.6x 90 80
100 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 70
Source: URA, Bloomberg, Maybank Kim Eng
Leverage for stocks vs physical properties
(%) 100 Stocks Residential property 80
60 TAKEAWAY
0-70 40 20-50 Developers’ stock movements amplify physical- 20 market price movements.
0 Stocks physical Source: MAS, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 15 EQUITIES OVER PHYSICAL LOWER TRANSACTION COST FOR STOCKS SINGAPORE
Transaction costs for stocks vs physical property Transaction costs: Stocks: 0.2%; Physical: 7-15% ABSD, 0-12% SSD (%) 20 Stocks Residential Property Yields: Stocks: 1-5.5%; Physical: 0-3%
16 Financing: Stocks: 2.88-6.5%; Physical: 1-2.5%
12 7-15
8 0-12
4 0.2 0 Stocks ABSD SSD Source: Maybank Kim Eng
Yields and financing costs for stocks vs physical property
(%) 8 Stocks Residential Property
6 2.88-6.5 TAKEAWAY 4 1-5.5
2 1-2.5 Lower transaction costs & higher yields for 0-3 stocks, though financing costs are higher.
0 Yield Financing Yield Financing
Source: Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 16 EQUITIES OVER PHYSICAL STOCKS AT DISCOUNT TO PHYSICAL MARKET SINGAPORE
Current prices, RNAV discounts and TPs for selected property developers We are POSITIVE on Singapore property developers. We have BUY ratings for all six covered stocks. Current price TP RNAV discount (%) (SGD) Singapore accounts for a big part of valuations for City (7) (33) (25) (44) (44) (42) Developments (CDL), UOL, GuocoLand (GUOL) and Bukit 18 Sembawang (BS).
16 14.20 BS is the most concentrated proxy for Singapore residential 14 13.25 market.
12 10.40 10 8.69 8.55
8 6.03 6 4.10 3.67 4 3.00 3.15 2.59 2.11 2
0 CAPL CDL UOL GUOL BS HOBEE
Source: Bloomberg, Maybank Kim Eng TAKEAWAY Developer stocks currently trade at a discount to the physical market.
THE DOOR TO ASEAN PROPERTY 17 EQUITIES OVER PHYSICAL BS IS A PURE SINGAPORE RESIDENTIAL DEVELOPER SINGAPORE
Owns vast plots of legacy land worth one-third of stock value Bukit Sembawang (BS) is a pure Singapore residential developer.
Condos Landed Legacy land Others Owns vast plots of legacy land worth about 30% of its valuation. Less exposed to escalating land prices in the market. Others 1% Condominiums and landed homes under development account for nearly 70% of its valuation.
Legacy land 31%
Condos 49%
Landed 19% TAKEAWAY
Source: Company, Maybank Kim Eng BS provides pure exposure to a residential rebound.
THE DOOR TO ASEAN PROPERTY 18 EQUITIES OVER PHYSICAL BS PROVIDES PROSPECTIVE RETURNS OF 12% SINGAPORE
Return profile With a strengthening property market, we see BS’ RNAV discount (SGD) TP DPS Current price narrowing to 20% and expect over 40% upside to our SGD8.55 TP. 10.0 0.33 5-year IRR 12% total return Assuming our TP is reached over a 5-year period, we estimate (7% price + 5% yield) total annualised returns of 12% on an unlevered basis. 5.0 8.55 (6.00) 0.33 0.33 0.33 0.33 Returns could be enhanced by 10.6ppts if an investor leverage 0.0 the stock by 60% (historical volatility = 14%).
(5.0)
(10.0) Current Y1 Y2 Y3 Y4 Y5
Source: Maybank Kim Eng
Returns can be enhanced with leverage
(%) 25
20 10.6 15 TAKEAWAY
10 Higher potential returns from BS than physical 5 market.
0 Unlevered 60% LTV
Source: Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 19 INDUSTRIAL REITS ARE ALTERNATIVES TO LARGE SCALE INVESTMENTS IMPROVING INDUSTRIAL-SECTOR FUNDAMENTALS SINGAPORE
IGLS programme (1H03 to 1H18) Modest government land sales since 1H15, with supply-side (ha) Confirmed List Reserve List Average policies aimed at SME end-users. 30
25 Private investment opportunities limited by shorter land tenures of new Industrial Government Land Sales (IGLS) sites, stringent 20 Jurong Town Corporation (JTC) subletting and lease-assignment 15 rules.
10 Supply has peaked after 2014 surge. Demand growth led by ‘New 5 Economy’ industries, tilted to business parks & high-spec properties. 0 1H11 2H11 1H03 2H03 1H04 2H04 1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18
Source: URA, JTC, Maybank Kim Eng
Industrial supply-demand outlook
Net Supply Net Demand Net Supply / Net Demand (RHS) Average (RHS) (m sqm) (x) 3.0 2.5
2.5 2.0
2.0 TAKEAWAY Avg = 1.1 1.5 1.5 Fundamentals are supported by better supply- 1.0 1.0 demand balance
0.5 0.5
0.0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E
Source: Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 20 INDUSTRIAL REITS ARE ALTERNATIVES TO LARGE SCALE INVESTMENTS GOVERNMENT INFLUENCES SECTOR ACTIVITY SINGAPORE
Industrial supply breakdown (1987-2017) Shift in ownership to private sector, whose contributions rose from 64% of total industrial land in 1987 to 86% at end-2017. Private Sector Public Sector
100% In 1998-2007, an average 24% of island-wide available industrial land was held by public sector. This fell to 16% in the last 90% decade.
80% Reasons: 1. Asset divestments by JTC to private owners in 2008-2011; 70% and
60% 2. Increased land supply for private investments in 2010-2014 through IGLS 50%
40%
30%
20%
10%
0% TAKEAWAY 1991 2001 2011 1987 1988 1989 1990 1992 1993 1994 1995 1996 1997 1998 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 Singapore attempts to balance REIT market Source: URA, JTC vibrancy whilst keeping occupancy cost at manageable levels.
THE DOOR TO ASEAN PROPERTY 21 INDUSTRIAL REITS ARE ALTERNATIVES TO LARGE SCALE INVESTMENTS JTC OVERSEES PRICES AND RENTALS SINGAPORE
120 Jan 2013 Jan 2012 Successful bidders for selected industrial GLS All land zoned Business sites sold from 1 Jan-13 required to build min. number and size of large factory units. 110 1, 2 prohibited from strata subdivision for SSD of 15%, 10% and 5% imposed on industrial selected sites near MRT properties sold within 1, 2, and 3 years of stations or as decided purchase on or after 12 Jan-13. by govt. for 10 years Institutional investors no longer allowed 100 from TOP, and min. earlier option of monthly rental payment, but GFA of 150 m² on instead to incur upfront land premium for Oct 2014: Max. allowable sublet Jul 2001: strata units in multi- remaining part of the lease. JTC offers rental user developments. quantum adjusted 90 rebates for 12 months from 50% to 30% of May 2001: GFA, and JTC tenants Industrial land sales to help businesses Apr 2013: cope with slowdown, disallowed from quantum for 2001 Subletting rules for subletting premises. and extends this till reduced from 25 ha third-party facility 80 end Jun-03. to 10 ha. providers relaxed with min. GFA for anchor Oct 2015: tenant halved to 1,500 Min. GFA requirement Rental Index m², but JTC lessees for anchor subtenants 70 wishing to sublet reduced from 1,500 required to sublet at m² to 1,000 m², and least 50% of GFA to one MOP of 3 years/term imposed on Price Index or more JTC-approved 60 anchor tenants. subsequent anchor subtenants relaxed to allow for greater flexibility. 50 Nov 2013: Restriction period for JTC lessees assigning premises after Feb 2004: fulfilling investment period (~3 years) extended by 5 years, Firms given full Jan 2017: with restriction for sec. market purchasers from 3 years to 5 JTC gives 3-10% 40 discretion to sublet years (properties with ≤ 30 years of lease remaining) or 10 Mar 2009: rental rebates to all with lessees/tenants Jan 2005: years (>30 years lease remaining). JTC provides 15% its 250 O&M tenants allowed to sublet JTC reduces land MOP increased for approved anchor tenants in sale-and- rental rebate as part and lessees for 2017, 100% GFA from lease rents and prices by up leaseback arrangements, occupying at least 50% of the GFA of Budget Day the first for industrial 30 commencement/TOP, to a-third, aimed to measures, and allows and min. 1,500 m², from 3 years to 5 years (on sites with ≤ 30 boost Singapore’s properties since GFC. from previously ≤ 50% all tenants to sublet years lease remaining) or 10 years (>30 years remaining). of GFA in first 5 years global investment up to 100% of GFA Sales ban on owners of properties on JTC-leased sites with <5 competitiveness. of lease. until Dec-11. years lease balance is applied to leases <3 years. 20 1Q99 3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17
Source: URA, JTC, MTI, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 22 INDUSTRIAL REITS ARE ALTERNATIVES TO LARGE SCALE INVESTMENTS SECTOR COULD BENEFIT FROM REDEVELOPMENT PLANS SINGAPORE
Industrial S-REITs’ asset breakdown by land tenure Sector could benefit from longer-term regeneration plans. Assets are selectively re-purposed for new growth industries (e.g. data Business Parks centres). About 50% of the assets held by REITs have land tenures High-Specs of 40 years or less. Light & General Industrial Logistics Integrated Development & Others Selective re-development projects: (SGD m)
8,000 1. Two flatted factories redeveloped for SGD250m into a build- 7,413 to-suit (BTS) building for HP at the Telok Blangah Cluster. Resulted in SGD66m of development gains for MINT. 7,000 2. AAREIT completed four redevelopment projects since 2011, adding 1.8m sf of space or 27% to its portfolio and SGD29m 6,000 of rental income. 5,093 5,000 4,428
4,000 3,805
3,000
2,000 1,385 TAKEAWAY 1,000 Supply-side measures target SMEs & support
0 landlords’ property redevelopment. <30 years <40 years <50 years <60 years >60 years
Source: Companies, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 23 INDUSTRIAL REITS ARE ALTERNATIVES TO LARGE SCALE INVESTMENTS REITS PROVIDE EXPOSURE TO UNDERLYING SECTOR RECOVERY SINGAPORE
AREIT’s share price and business-park rents (SGD) Strong correlation with fundamentals. AREIT is a good proxy for JTC business park rental index AREIT share price - RHS business parks. 110 3.00 108 2.50 Large-cap REITs’ occupancy has been 89% since 3Q16. Should 106 improve on weaker asset-conversion pressures. 104 2.00 102 S-REITs are required to distribute at least 90% of their taxable 100 1.50 98 income to unit holders for tax transparency. 1.00 96 94 0.50 92 90 0.00 1Q11 3Q11 1Q10 3Q10 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17
Source: URA, JTC, Bloomberg
Occupancy (2Q07 to 4Q17)
AREIT MINT MLT JTC (%)
100
96.2 95 91.1 TAKEAWAY 90 90.1 89.0 85 Large-cap, liquid REITs track sector fundamentals.
80 Tax transparency enhances their appeal. 2Q11 4Q11 2Q07 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 4Q17
Source: Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 24 INDUSTRIAL REITS ARE ALTERNATIVES TO LARGE SCALE INVESTMENTS SYSTEM LIQUIDITY CONDUCIVE FOR REITS SINGAPORE
Industrial-sector cap rates and cost of debt Low rates relative to history support buoyant capital-market & debt-funding. (%) Cost of debt Cap rates (low) Cap rates (high) 8.00 Borrowing cost at 2.2-3.9% for REITs vs 5.5-7.5% industrial-sector 7.00 cap rates. 6.00
5.00 3.90 3.90 3.55 3.56 3.60 AREIT, MINT & KDCREIT are best-positioned to explore debt 4.00 2.90 2.90 3.20 funding, given their headroom at 10-14% of AUM. 3.00 2.20 2.30 2.00 1.00 0.00 KDCREIT MLT AREIT MINT Soilbuild ESR-REIT Cache AAREIT Viva Sabana
Source: Companies
Estimated debt headroom at 40% gearing and AUM comparison
Debt headroom % of AUM - RHS (SGD m) (%) 900 16.0 800 14.0 700 12.0 600 10.0 TAKEAWAY 500 8.0 400 6.0 300 REITs have sufficient debt headroom to acquire for 200 4.0 DPU growth. 100 2.0 0 0.0 AREIT MINT KDCREIT AAREIT Soilbuild Sabana ESR-REIT Viva MLT Cache
Source: Companies
THE DOOR TO ASEAN PROPERTY 25 INDUSTRIAL REITS ARE ALTERNATIVES TO LARGE SCALE INVESTMENTS AREIT IS BEST PROXY SINGAPORE
AREIT’s rental-reversion profile Rental reversion for its Singapore business & science parks & hi- (%) 4-year historical average Dec 2017 quarter 3-year forecast 20.0 spec industrial properties (57% of AUM) should improve along with demand. 15.3 15.0 15.0 DPUs to grow an average of 3.7% pa over FY18-22E, as NPI rises 9.0 10.0 7.5 4.8% and borrowing costs increase 0.9%. 6.6 5.8 5.8 6.5
5.0 2.2 2.5 -2.3 0.0 0.0
-5.0 Business and science Hi-specs industrial Light industrial Logistics & Integrated Singapore weighted parks distribution centres development average
Source: Company data, Maybank Kim Eng
AREIT’s revenue, NPI and DPU growth profile
(%) Revenue NPI Borrowing costs DPU 30.0
25.0
20.0 TAKEAWAY 15.0 10.0 AREIT’s portfolio is skewed towards business 5.0 parks & high-spec industrial space. 0.0 FY17 FY18E FY19E FY20E FY21E FY22E -5.0
Source: Company data, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 26 DATA CENTRES AN EMERGING INVESTMENT PROPOSITION DATA CENTRES ARE A FAST-GROWING SEGMENT SINGAPORE
Drivers for global data-centre growth Growth led by:
Increased take-up of digital technologies.
Connected devices, which require large quantities of data to be processed and analysed in real time.
Need for cost-effective, reliable & secure data-centre solutions.
Stringent regulations on data collection and protection. These are prompting corporates to store their data locally.
TAKEAWAY Singapore’s outsourced data-centre revenue is projected to rise at a 12% CAGR from SGD1.3b in 2017 to SGD2.0b by 2021*.
Source: Companies, *Structure Research
THE DOOR TO ASEAN PROPERTY 27 DATA CENTRES AN EMERGING INVESTMENT PROPOSITION NICHE ASSETS GEOGRAPHICALLY WELL-DISTRIBUTED SINGAPORE
Singapore’s data-centre locations Data centres occupied 2.3m sf in 2017 or 0.4% of industrial stock, including 58 unique co-location facilities. Majority are located in the east.
Co-location revenues is 30% of the market, with SingTel and Equinix as market leaders, with a combined 46% market share.
Singapore represents an APAC hub for cloud providers. Amazon Web Services, Microsoft and Google are all in the midst of building their own data centres here.
TAKEAWAY Singapore’s positive attributes include its developed infrastructure, geography, business environment and government policies.
Source: Structure Research
THE DOOR TO ASEAN PROPERTY 28 DATA CENTRES AN EMERGING INVESTMENT PROPOSITION STRONG DEMAND COULD SUPPORT FURTHER CONVERSIONS SINGAPORE
Transaction values for 7 Tai Seng Drive Mapletree Logistics Trust (MLT) in Dec 2017 divested a warehouse at 7 Tai Seng Drive for SGD68m to its sponsor Mapletree (SGD psf) Capital value Premium - RHS (%) Investments. For redevelopment into a data centre.
350.0 120.0 The 20-year old property, with GFA of 23,844 sqm, was acquired in 2006 for SGD38.3m. It was valued as at end-Mar 2017 at SGD31.8m. 300.0 100.0 Purchase price was above the SGD32-40m range assessed by two independent valuers. 250.0 80.0
200.0
60.0
150.0
40.0 100.0
20.0 50.0 TAKEAWAY
0.0 0.0 Investors see value in data-centre redevelopment FY07 FY17 Divestment in Dec 2017 projects.
Source: Companies
THE DOOR TO ASEAN PROPERTY 29 DATA CENTRES AN EMERGING INVESTMENT PROPOSITION RETURNS, BUT CAVEATS ON REDEVELOPMENT OPTIONS SINGAPORE
Valuations of data centres and light industrial/ warehouses in the past 12 months Demand for data centres could hasten brownfield conversions (SGD psf) (9-12 months) instead of greenfield developments (15-24 months). 800.0 High entry barriers from construction & fit-out costs, of 678.0 SGD1,200-1,400 psf. 700.0 662.9 Conversions are subject to JTC approval, on top of requirements 600.0 for: 525.0 A minimum 5-metre floor-to-ceiling height 120,000 sf of GFA and 500.0 30,000 sf of unused GFA for the installation of mechanical and electrical equipment. 400.0 347.8 308.4 300.0 275.8 217.0 183.5 200.0
100.0
0.0 STT Tai Seng Kim Chuan 38A Kim Starhub (19 Datapulse 7 Tai Seng Natural Cool 11 Tai Seng TAKEAWAY (35 Tai Seng Telecom Chuan Road Tai Seng Dr) (15A Tai Seng Drive (29 Tai Seng Link St) Complex Dr) Ave) Wide disparities in capital values among industrial Source: Companies, URA properties.
THE DOOR TO ASEAN PROPERTY 30 DATA CENTRES AN EMERGING INVESTMENT PROPOSITION REITS ARE POSSIBLE PROXIES SINGAPORE
Singapore’s data-centre AUM contributions AREIT and MINT together own seven data centres, at 5-6% of their AUM. (SGD m) AUM Singapore data centres (% of AUM) - RHS (%) Keppel DC REIT ҁNot Rated) is the only pure data- centre S-REIT, 12000 50.0 with 45% of its AUMfrom three Singapore assets. 44.6 Consensus estimates FY18 DPUs of 5.6% for Keppel DC REIT vs our forecast of 6.6% for AREIT and MINT. 10000 40.0
8000
30.0
6000
20.0
4000
10.0 6.0 2000 5.3 TAKEAWAY REITs an option to gain exposure to this growth 0 0.0 AREIT MINT Keppel DC REIT segment.
Source: Companies, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 31 E-COMMERCE THREAT? SALES EROSION ALREADY AT 7.5% SINCE 2013 SINGAPORE
Store-based retail sales and per-area growth in 2011-2020E We expect sales efficiency to fall with increasing e-commerce adoption. Store-based retail sales Sales per area (RHS) (SGD b) (SGD m psm) Sales psm have already declined by 7.5% in last four years. 31.0 5.4 Retail-space consolidation may become even more imperative.
30.0 5.2
29.0 5.0
28.0 4.8
27.0 4.6
26.0 4.4
25.0 4.2
24.0 4.0 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E
Source: URA, Euromonitor TAKEAWAY We see further erosion in store-based sales.
THE DOOR TO ASEAN PROPERTY 32 E-COMMERCE THREAT? ONLINE PENETRATION COULD JUMP TO 10-20%, FROM ABOUT 5% SINGAPORE
Share of online retail sales in China, Korea and the US Penetration in more mature markets like China (20% of total), (%) Korea e-commerce (cyber shopping) Korea retail sales ex-stores US China Korea (14-20%) and the US (10%) suggests ASEAN’s e-commerce 25.0 industry is in its infancy.
20.0 Share of e-commerce sales in Singapore could double to 5-10% in the next five years, according to AT Kearney. 15.0 Bricks-and-mortar retail channels in Singapore have yet to feel 10.0 the full brunt of online retailing.
5.0
0.0 Jul-11 Jul-10 Jul-17 Jul-16 Jul-15 Jul-14 Jul-13 Jul-12 Apr-11 Jan-11 Jan-11 Oct-11 Apr-10 Apr-17 Apr-16 Apr-15 Apr-14 Apr-13 Apr-12 Jan-10 Jan-10 Jan-17 Jan-17 Jan-16 Jan-16 Jan-15 Jan-15 Jan-14 Jan-14 Jan-13 Jan-13 Jan-12 Jan-12 Oct-10 Oct-17 Oct-16 Oct-15 Oct-14 Oct-13 Oct-12
Source: CEIC
Online retail market shares in selected Asian countries
(%) 29.4 2017 2022E 30.0
25.0 20.4 20.0 TAKEAWAY
15.0 10.3 E-commerce could make up more than 10% of 10.0 6.6 5.4 6.3 6.1 retail sales by 2021*. 3.5 5.0 2.7 2.3 1.8 2.6 0.9 1.4 0.0 China S'pore HK M'sia Indonesia Thailand Phils Source: Euromonitor
THE DOOR TO ASEAN PROPERTY 33 E-COMMERCE THREAT? GROWTH LIKELY TO BE SUSTAINED AT 20+% OVER NEXT FIVE YEARS SINGAPORE
Singapore’s store-based and online retail shares In 2002, eBay first led Singapore into the e-commerce era. But (SGD b) Store-based Non-store % of total retail (RHS) (%) online sales only picked up recently, from 2012. 40.0 12.0 35.0 10.0 Sales rose by a 15% CAGR over 2012-2017, supported by better 30.0 online-payment infrastructure, logistics and product availability. 8.0 25.0 20.0 6.0 Amazon’s launch of its Amazon Prime in Singapore in Jul 2017 15.0 was the latest salvo. 4.0 10.0 2.0 5.0 0.0 0.0 2011 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018-22E Source: Euromonitor
Singapore’s store-based and online retail growth in 2010-2022E
(%) 20.0
15.0 Non-store avg.=11.7 10.0 TAKEAWAY Store-based avg. = 3.3 5.0 Online retailing to grow at the expense of in-store 0.0 retailing. 2011 2010 2012 2013 2014 2015 2016 2017 -5.0 2018-22E
Source: Euromonitor Store-based retail Non-store retail
THE DOOR TO ASEAN PROPERTY 34 E-COMMERCE THREAT? NOT ALL PRODUCTS FACE SAME THREAT SINGAPORE
Preference to buy online vs in-store Consumers should continue to support physical stores for certain products, based on a PWC Total Retail 2017 survey of shopping Category Online (%) In-store (%) behaviour and expectations of nearly 25,000 consumers in 29 Books, music, movies & video games 60 28 countries.
Consumer electronics & computers 43 51 They are more likely to purchase books, music, movies and video Clothing & footwear 40 51 games online. Toys 39 37
Health & beauty (cosmetics) 37 47 Brands like Home Depot appear more immune to the Amazon threat. Consumers still need to browse paint colours or Sports equipment/outdoor 36 44 appliances in store before making their purchases. Home Depot Household appliances 33 56 believes that only 25% of its business is susceptible to online competition. Jewellery/watches 32 49
DIY/home improvements 30 52
Furniture & homeware 30 59
Groceries 23 70
Source: PWC
TAKEAWAY Consumers still prefer to visit physical stores to look and feel, for selected categories.
THE DOOR TO ASEAN PROPERTY 35 E-COMMERCE THREAT? MCT MOST AT RISK SINGAPORE
Proportion of defensive rental income to e-commerce Thankfully, retail REITs’ portfolios are actively managed. Occupancy is close to 100%. Should outperform physical retail- property market. (%) Latest FY 5-year prior Retail occupancy (as at end-Dec 2017) MCT is more susceptible to e-commerce disruptions. This is due 110 to its tenant mix. VivoCity has a higher-than-peers’ mix of fashion tenants. 100 Changi Airport and Orchard Road malls draw stronger traffic and 87.3 90 86.1 expenditure as they are better geared to tourist volumes.
80 75.2 73.7 72.7 69.7 67.6 70 64.7 59.5 58.7 60
50
40
30
20 TAKEAWAY
10 MCT’s main challenge is its higher concentration
0 of fashion tenants at VivoCity. SPH REIT FCT CMT SGREIT MCT
Source: Companies
THE DOOR TO ASEAN PROPERTY 36 E-COMMERCE THREAT? MALLS HAVE INTRODUCED F&B; SPECIALTY, DISCOUNT STORES SINGAPORE
F&B contributions to gross rental income Malls are introducing activity-based tenants & facilities. F&B tenants yielding lower now contribute 11-37% to rental income, (%) Latest FY 5-year prior 37.6 up from 10-33% five years ago. 40 35.4 32.6 33.4 35 31.0 31.2 30.0 27.9 27.3 Department stores, which led growth in mixed retailers’ sales in 30 25.6 the past, have stalled in recent years and should continue to 25 20.3 grow. 20 15.2 11.2 15 10.1 Variety stores and warehouse clubs could outpace the revenue 10 growth of mixed retailers. 5 0 FCT (Portfolio) SPH REIT Suntec REIT MCT (Vivocity) CMT (Portfolio) SGREIT (Wisma SPH REIT (Clementi Mall) (Suntec City) Atria) (Paragon)
Source: CEIC
Singapore’s mixed retailer sales growth in 2003-2022E
(%) 2003-2010 2010-2017 2017-2022E
18.0 16.7
16.0
14.0 13.0
12.0 TAKEAWAY
10.0 7.5 8.0 7.1 A new wave of Asian food brands have set up shop
6.0 in Singapore. Their contributions are set to rise.
4.0 2.1 2.1 2.0 1.3 2.0 0.8 0.6
0.0 Overall mixed retailers Department stores Variety stores Warehouse clubs Source: Euromonitor
THE DOOR TO ASEAN PROPERTY 37 FOREIGN OWNERSHIP RESTRICTIONS SINGAPORE
Real estate asset class and considerations
Residential & commercial properties are accessible to foreign investors. Residential Commercial Asset class Developer stocks REITs properties properties However, foreign buyers of residential properties need to pay higher stamp duties. Foreign Foreign ownership of No restriction. No restriction. No restriction. investment land disallowed except on Sentosa Listed REITs enjoy tax transparency on underlying property Island. income.
Qualifying Certificate Listed developers are (QC) rules require treated as foreign foreign developers to developers. complete projects within five years and sell all units within two years of completion; failing which will lead to extension charges at 8%/16%/24% for the 1st/2nd/3rd and subsequent years, prorated for number of unsold units.
TAKEAWAY
Tax Additional Buyer’s No additional taxes. No additional taxes. Tax transparency on treatment Stamp Duty (ABSD) of property rental Less restrictions on owning developer stocks than 15%. income if at least 90% of income distributed residential properties. Favourable tax treatment to unitholders. for REITs.
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THE DOOR TO ASEAN PROPERTY 40 PHILIPPINES Romel Libo-on (63) 2 849 8839 [email protected]
INDIRECT ACCESS TO LOW END HOUSING VIA EQUITIES THE DOOR TO
Homes for masses especially in the provinces ASEAN PROPERTY should grow the fastest. Disposable income for lowest decile households enjoy the fastest growth. But access to such physical properties is restricted for foreigners. The indirect entry is via equities.
LOCATION, LOCATION, LOCATION - MANILA BAY
Manila Bay Area should enjoy steady capital appreciation, supported by traffic from casino tourism and offshore gaming. Land value in that area has appreciated 20% over the past 5 years, while condominium prices have appreciated around 15% over the same period.
MIXED-USE PROPOSAL
Acquire land or lease near New Clark City, north of Metro Manila to enjoy value enhancement through infrastructure improvements. Clark is home to the Clark International Airport, Tutuban-Clark railway, and Clark-Subic railway.
March 2018 41 INDIRECT ACCESS TO LOW END HOUSING VIA EQUITIES HOUSEHOLD INCOME GROWTH PHILIPPINES
Historical average annual household income Household income at the lowest decile grew at the fastest pace. With income growth, households tend to spend more PHILIPPINES CAGR on improving living conditions. Mean household income 2003 2006 2009 2012 2015 2003-2015 (PHP '000) Upward mobility triggers an upgrade cycle in physical First decile 25 32 44 69 86 10.8% property, possibly perpetuated by socialised/economic Second decile 40 51 69 92 114 9.1% housing at the low end. Third decile 51 65 88 108 133 8.3% Fourth decile 64 81 107 130 156 7.7% Households in Metro Manila experience slower income Fifth decile 80 100 131 153 182 7.1% growth than nationwide mean. This explains why demand Sixth decile 101 124 159 182 218 6.6% for housing in the provinces is more robust. Seventh decile 128 156 200 229 259 6.0% Eighth decile 169 205 260 286 320 5.5% We expect that listed developers to enjoy an increasing Ninth decile 237 292 364 381 415 4.8% percentage of sales from AONCR. Tenth decile 556 622 788 715 786 2.9% Average 145 173 221 235 267 5.2%
CAGR METRO MANILA (NCR) Mean household income 2003 2006 2009 2012 2015 2003-2015 (PHP '000)
First decile 74 81 100 147 174 7.4% Second decile 103 119 146 180 223 6.6% Third decile 124 142 174 216 260 6.4% TAKEAWAY Fourth decile 146 170 207 256 281 5.6% Fifth decile 171 202 243 286 330 5.6% Sixth decile 200 242 286 332 362 5.1% Demand for mass housing underpinned by Seventh decile 239 294 349 365 412 4.6% robust growth in lower-decile household Eighth decile 298 366 439 467 487 4.2% income. Ninth decile 405 500 592 551 602 3.4% Tenth decile 556 622 788 715 786 2.9% Average 376 412 454 481 515 2.6%
Source: PSA, Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 42 INDIRECT ACCESS TO LOW END HOUSING VIA EQUITIES AFFORDABILITY METRICS PHILIPPINES
Even then, listed developers mostly address the open Mortgage scenarios per price segment market, comprising 450k households or 1.7% of the
Mass Housing Open Market nationwide household population. Socialized Economic Affordable Middle High-end PHP450K PHP1.7m PHP3.2M We estimate minimum annual household income of PHP1.2m < PHP450K <> <> <> > PHP6m PHP1.7m PHP3.2m PHP6m as the entry level for this addressable market. Typical value of property (PHP '000) 450 1,250 3,000 5,000 11,250 At this level, price-to-income ratio is 2.6x, in the affordable Size of lot (sqm) 22 25 30 50 75 band. Price/sqm (PHP'000/sqm) 20 50 100 120 150 Loan to value (%) 80 80 80 80 80 Assuming a 100bps increase in cost of capital, monthly Equity (%) 20 20 20 20 20 amortisation payments will increase by 5.9%. Mortgage Loanable amount (PHP '000) 360 1,000 2,400 4,000 9,000 servicing ratio will increase 1.5ppts to 26.5% of monthly Mortgage rate (%) 8.6% 8.6% 9.0% 9.0% 9.0% household income. Tenure (yrs) 15 15 15 15 15
Monthly Mortgage (PHP/month) (3,538) (9,827) (24,161) (40,269) (90,604)
Yearly Mortgage (PHP/year) (42,453) (117,924) (289,934) (483,224) (1,087,254)
Typical value of property (USD) 9,000 25,000 60,000 100,000 225,000
Monthly amortisation (USD) (71) (197) (483) (805) (1,812)
Monthly household income required (PHP/ month) 14,151 39,308 96,645 161,075 362,418 Annual household income required (PHP/ year) 169,810 471,695 1,159,737 1,932,895 4,349,014 TAKEAWAY
Mortgage servicing ratio (%) 25.0 25.0 25.0 25.0 25.0 Price-to-income ratio (x) 2.7 2.7 2.6 2.6 2.6 Healthy demand for socialised & economic housing provides a positive feedback loop for higher-end Estimated % of household population (2017F) 45.2 4.7 1.7 444 Total households (2017F) 2,916 1,271 homes which listed developers cater to.
Source: Bank Surveys, Pag-IBIG fund, Maybank Kim Eng estimates * Excludes proportion of population that cannot afford socialised housing
THE DOOR TO ASEAN PROPERTY 43 INDIRECT ACCESS TO LOW END HOUSING VIA EQUITIES HOUSING-RELATED SPENDING PHILIPPINES
Housing-related expenditures in PHP terms have grown at a 5.7% CAGR from 2002-2015. Total housing expenditures have grown at Historical household related spending a faster rate at 6.9% annually over the same period.
(PHP b) (%) As a percentage of household expenditures, it has declined from 14% in 2000 to 12% in 2015, a decline of 2.1ppt but still at 6,000 16.0 double-digit rates.
596 14.0 5,000
520 12.0 4,000 10.0 415 3,000 8.0 325
267 6.0 2,000 258 4.0
1,000 2.0
- - 2000 2003 2006 2009 2012 2015 TAKEAWAY Housing-related expenditures Other HH expenditures Housing is still a major consumption item for Housing % of total expenditures (rhs) households, at 12% of total expenditure.
Source: PSA, Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 44 INDIRECT ACCESS TO LOW END HOUSING VIA EQUITIES BALANCED TAKE-UP PHILIPPINES
Demand drivers based on unit take-up estimates Real estate take-up appears balanced among the three core groups of buyers. Assumptions are:
PHILIPPINES 1. New household formation rates of 1.7% and 2.4% for 100% Philippines and Metro Manila. Balance is for provinces. Upward mobility, prompted by income growth, is more 80% 33% 36% 37% 36% 35% important for demand outside the national capital region 60% than inside. 37% 40% 37% 38% 40% 42%
20% 2. Overseas Filipino sales & foreign national sales 29% 27% 25% 25% 23% (international sales) 35-40% from 2013 to 2017. 0% 2013 2014 E 2015 E 2016 E 2017 E 3. Secondary purchases are purchases related to investment NCR demand, multiple housing requirement and others.
100% 80% 48% 49% 48% 47% 45% 60% 40% 39% 39% 40% 42% 44% 20% 0% 13% 12% 12% 11% 11% 2013 2014 E 2015 E 2016 E 2017 E
AONCR
100% TAKEAWAY 9% 17% 21% 21% 23% 34% 34% 35% 37% 39% 50% Growing pool of foreign investors spurring residential demand. 0% 2013 2014 E 2015 E 2016 E 2017 E
HH formation OF/Foreign National Secondary purchases
Source: Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 45 INDIRECT ACCESS TO LOW END HOUSING VIA EQUITIES EQUITIES FOR EXPOSURE PHILIPPINES
On a 5-year historical basis, the Philippine Property Index Metro Manila capital values vs PPROP Index (2005-2019F) (PPROP Index) and capital values of condos in Metro Manila have been growing at a similar pace of 11.5% and 11% CAGR, respectively. PHP/sqm Index The steady rise in capital values have been driven by 250,000 4,500 strong demand in a robust economy.
4,000 Positive consumer confidence levels, low unemployment levels of around 5.7%, increasing household incomes of 200,000 3,500 around 5%, should sustain housing demand.
3,000 The PPROP Index has been driven by earnings growth in 150,000 the past 5-years of 11%, in line with index growth. 2,500 Stocks outperformed physical overtime. So it is better to 2,000 buy equities. 100,000 1,500
1,000 50,000
500 TAKEAWAY 0 0 1Q11 3Q11 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 Growth in property equities are in lock-step with
Residential capital values per sqm (Makati), lhs PPROP Index, rhs increases in capital values and sector earnings.
Source: Colliers, Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 46 LOCATION, LOCATION, LOCATION - MANILA BAY RESIDENTIAL SUPPLY & DEMAND PHILIPPINES
Metro Manila’s condo market came back to life in 2016-2017, with unit take-up up 27% pa on average. Residential condo launches and take-ups This was spurred by: 80 1. Pent-up demand after elections in 2015 70 70 67 64 2. Sustained economic growth under the new 61 administration 60 58 60 54 52 53 3. Demand from foreign nationals & speculators
50 47 43 43 40 40 37 34 35 33 33
30
20
10
- TAKEAWAY 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F
Launches ('000 units) Take-up ('000 units) Resurgence in residential take-up sales has absorbed excess supply. Source: Developers, Colliers, Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 47 LOCATION, LOCATION, LOCATION - MANILA BAY LOW INVENTORY LEVELS PHILIPPINES
Estimated residential inventory levels down to 12.5 months Estimated residential inventory months from a peak of 16.9 months in 2015 as launches have slowed from 2014 to 2016, while sales take-ups have recovered starting 2016.
months Developers are aware of declining inventory levels and are 18 16.9 now more likely to increase their launches to capitalise on 16.3 the recovering market. 15.5 16 15.0 14.4 Listed developers are dominant in the addressable market. 14 13.1 13.0 Hence, they can manage supply to sustain prices. This is 12.5 12.7 unique to the Philippines. 12
10
8
6
4
2 TAKEAWAY
0 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F Developers, dominant in the addressable market, are able to self Source: Developers, Maybank Kim Eng estimates regulate.
THE DOOR TO ASEAN PROPERTY 48 LOCATION, LOCATION, LOCATION - MANILA BAY INCREASING LAND VALUES PHILIPPINES
5-year CAGR of land prices in Metro Manila was 15.5%. Listed Land value appreciation in Metro Manila developers have eight years of land bank on average.
PHP/sqm Land prices in Manila Bay Area, BGC, Makati CBD, and Ortigas CBD grew by 20%, 16%, 14%, and 12%, respectively in the past 700,000 five years.
Manila Bay Area appreciated the most due to a scarcity of raw 600,000 560,000 land combined with strong demand for future developments.
499,000 500,000
400,000
300,000 234,000
200,000 216,000
100,000
- TAKEAWAY Land prices continue to appreciate. Manila Makati CBD Ortigas CBD Fort Bonifacio (BGC) Manila Bay Area Bay Area land values growing the fastest in the past 5 years. Source: Colliers, Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 49 LOCATION, LOCATION, LOCATION - MANILA BAY SUPPLY FROM OUTSIDE CBDs PHILIPPINES
Future condominium supply is mostly coming from satellite Condominium supply based on completions per location cities outside Makati and Ortigas CBDs.
Units Aggregate supply of 18K and 16K units from 2017-2021 to come 14,000 from Manila Bay Area and Fort Bonifacio (BGC), respectively, a large portion of which will come in 2018.
12,000
10,000
8,000
6,000
4,000
2,000
- Manila Bay Area Fort Bonifacio Makati CBD Ortigas Center Others TAKEAWAY
2017F 2018F 2019F 2020F 2021F Bulk of residential supply is from satellite
Source: Colliers developments.
THE DOOR TO ASEAN PROPERTY 50 LOCATION, LOCATION, LOCATION - MANILA BAY DECLINING RESIDENTIAL CAP RATES PHILIPPINES
Declining residential cap rates in Makati CBD due to increases in cap values and flat rentals. Residential cap rates (2005-2017) Areas outside Makati CBD could provide better returns. Makati residential cap rates 9.0% We prefer Manila Bay Area to BGC due to higher expected returns. 8.0% 8.0%
7.0% 6.6% There is strong demand for homes by office workers in the area, including offshore gaming employees. Accessibility to the 6.0% airport, tourist destinations and casinos should support further capital value appreciation. 5.0% 5.0% 4.0% 1Q11 3Q11 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17
Residential cap rates (Makati) 12-year average cap rate
Estimated current cap rates for BGC and Manila Bay Area
6.0% TAKEAWAY 5.5% Falling residential cap rates in key CBDs. Fort Bonifacio (BGC) Manila Bay Area
Source: Colliers
THE DOOR TO ASEAN PROPERTY 51 LOCATION, LOCATION, LOCATION - MANILA BAY GAINS IN CONDOMINIUM PRICES PHILIPPINES
Sample of condo developments across Metro Manila Condo developments enjoy huge annual price appreciation, especially in the Manila Bay Area, Sold Housing Units ASP/unit ASP/sqm of 40% from 2013 to present. Property` Developer Location Launched % Sold units / Segment launched (PHP m) (PHP '000) month We believe Manila Bay Area has potential for Discovery Primea High End JTKC Land Makati Feb 2008 90 92% 1 24% 352 further capital gains with prices still much
Park Central High End Ayala Land Makati June 2016 281 90% 17 7% 269 below Makati CBD prices.
The Ellis Upscale Ayala Land Makati May 2016 237 93% 14 11% 177
The Travertine Tower 1 Upscale Ayala Land Pasig Mar 2017 588 81% 40 2% 118
Manila Bay Shore Residences Bldg 4 Upscale SM Prime Oct 2013 1,817 98% 35 40% 164 Area
Shang Salcedo Place Upscale Shang Prop Makati May 2012 861 100% 13 16% 178
Avida Towers Centera Middle Ayala Land Mandaluyong Feb 2013 683 95% 11 14% 106 Tower 4
Average 651 93% 19 16% 195
Selling prices of new launches (less than 12 months)
Sold Housing Units ASP/unit ASP/sqm Property Developer Location Launched % Sold units / Segment launched (PHP m) (PHP '000) month TAKEAWAY Park Central North Tower High End Ayala Land Makati Sep 2017 259 34% 29 68.0 332
The Connor Upscale OCLP Ortigas July 2017 970 78% 252 8.4 181 Prefer Manila Bay Area for upside in condo
Avida Towers Vireo Middle Ayala Land Taguig Aug 2017 474 82% 130 4.2 157 prices.
Arton Residences Upscale Rockwell Land Quezon City July 2017 400 41% 54 7.5 143
Kai Gardens Middle DMCI Mandaluyong Aug 2017 1028 46% 158 4.4 104
Source: Colliers
THE DOOR TO ASEAN PROPERTY 52 LOCATION, LOCATION, LOCATION - MANILA BAY ESTIMATED INVESTMENT RETURNS PHILIPPINES
5-year IRR assuming investment in Manila Bay Area vs Makati CBD and BGC Based on a 5-year investment horizon, base case assumes the following:
18.6% 16.8% 1. Capital gains: based on residential price appreciation
12.5% 2. Expenses deducted include insurance, real property tax, and 11.4% 12.1% 10.3% miscellaneous fees 9.1% 8.1% 6.4% 5.6% 3. Leverage is based on 80% LTV, 5.5% interest rate, 5-yr loan
2.4% Bear case assumes the following:
1. Capital gains: adjusted for higher cost of capital -0.2%
Manila Bay Area Makati CBD BGC Manila Bay Area - Makati CBD - BGC - levered 2. Expenses: kept the same levered levered 3. Leverage: same except for 100bps increase in interest rates Base case Bear case Benchmark rate
Estimated residential price appreciation
TAKEAWAY Higher expected returns in Manila Bay Area. Manila Bay Area Makati CBD BGC Look for opportunities in this location.
Base Case Bear Case
Source: Colliers, Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 53 MIXED-USE PROPOSAL INFRASTRUCTURE BENEFICIARY PHILIPPINES
List of infrastructure projects in Clark Priority infrastructure program of the government (Build Build Build) to drive growth of capital values outside Metro Manila. Est. cost Project Key Impacted Areas Schedule (PHP b) New Clark City, located 100kms north of Metro Manila, is a Manila-Clark Railway Project Manila, Bulacan, Clark 4Q17-4Q21 255 key beneficiary with two rail connections, one international Clark International Airport Expansion airport expansion, and government units transferring to its Clark 2017-1Q20 12.55 Project premises. Subic-Clark Cargo Railway Clark, Subic 4Q16-2Q21 57.6
New Clark City Clark 1Q16-1Q22 8.3 (Ph 1) New Clark City National Government Admin Clark 1Q168-4Q20 13.16 Center New Clark City Philippine Sports City Clark 1Q18-4Q21 97 Total cost 444
Developers with presence in Clark
Developer Project Size (hectares)
Ayala Land Inc Alviera, Marquee 1,125 Filinvest Inc Clark Mimosa, Clark Green City 522 Robinsons Land Corp Not yet launched 177 TAKEAWAY Megaworld Corp Capital Town 36 Vista Land and Lifescapes Camella Pampanga 9 “Build Build Build” to support asset prices SM Prime Holdings SM City Clark, SM Sky Ranch N/A outside Metro Manila.
Source: PPP Center
THE DOOR TO ASEAN PROPERTY 54 MIXED-USE PROPOSAL ECONOMIC AND HOUSEHOLD GROWTH PHILIPPINES
Historical GDP per capita of key growth regions (2009-2016) Per capita GDP growth in Central Luzon, where Clark is located, averaged 7.4% in the last eight years, even before PHP new infrastructure spending. 160,000 140,000 Pampanga has 479K households. Population growth was 3% from 2000 to 2015. 120,000
100,000 80,000 60,000 40,000 20,000 - 2009 2010 2011 2012 2013 2014 2015 2016
Calabarzon Central Visayas Western Visayas Central Luzon Southern Mindanao
Pampanga household growth (2000-2015)
Households 600,000
500,000 400,000 TAKEAWAY 300,000 200,000 Investments in the area are likely to bump 100,000 GDP growth above its 7.4% historical - average. 2000 2007 2010 2015
Source: PSA
THE DOOR TO ASEAN PROPERTY 55 FOREIGN OWNERSHIP RESTRICTIONS PHILIPPINES
Real estate asset class and considerations
Type Yes No Remarks Direct ownership of land is only allowed for Filipino citizens.
Only Filipino citizens are allowed to directly own or Land ownership x acquire land Foreign ownership of real estate is typically limited to condominium purchases or partnerships. Titles of land owned by Filipino spouse have to be under Land titles x the citizen's name. Foreign spouse's name can only be included in buying contracts. Larger domestic banks offer financing to foreign nationals but
Foreign nationals and/or corporations may enter into limited to immigrant, retiree, or permanent residence visas. lease agreements with Filipino landowners for an initial Land leases x period of up to 50 years, renewable once for an additional 25 years. Partnerships with at least 60% of shares owned by Filipinos are entitled to own or acquire land. Foreign JV partnerships x board members of a landholding company are limited to 40% of seats.
Foreigner limit of 40% of total condo units or share in a Condo units x condo corporation
Ownership of structure is allowed as long as foreigner Houses or buildings x does not own the land on which it is built on
Second-hand x Same restrictions as for condo units, houses & buildings TAKEAWAY market
Larger banks offer financing but this is limited to Bank financing x immigrants, retirees, permanent residents or those Foreign participation in real estate is limited married to Filipino citizens to condominiums and partnerships.
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THE DOOR TO ASEAN PROPERTY 58 VIETNAM Thai Quang Trung (84 28) 44 555 888 [email protected]
RESIDENTIAL VIA LISTED EQUITIES
Listed equities provide earnings visibility & land-bank scalability to cater to a burgeoning residential market.
RESIDENTIAL DEVELOPMENT IN DISTRICT 2 THE DOOR TO
Less crowded space. Still possible to secure ASEAN PROPERTY land in District 2 at reasonable prices for high-rise development. “Free-ride” improvements in amenities, which should enhance returns.
OFFICE DEVELOPMENT IN DISTRICT 2
Expect HCMC’s service-oriented economy to attract more corporates into setting up headquarters in District 2.
March 2018 RESIDENTIAL VIA LISTED EQUITIES MODERATE GROWTH OF FOREIGN HOMEBUYERS VIETNAM
No. of foreigners purchasing homes in Vietnam Before a new Housing Law came into effect in July 2014, the overseas Vietnamese diaspora made up most of the homebuyers in Vietnam. 800 Since then, foreigners are technically only required to have valid entry visas to qualify for property purchases. 700 Even then, growth of foreign ownership since 2014 has been moderate.
600 We think the main problem is the need for developers to secure approval from the relevant authorities, including Ministry of Public Defence, to certify that their projects are 500 eligible for sale to foreigners. Because not all developers are willing to do so, effective supply for foreigners is limited. 400
300
200
100 TAKEAWAY
0 Supply available to foreign buyers is limited to Prior to 2014 From 2014 to 2016 developments that are open to foreigners such as Source: Ho Chi Minh City Real Estate Association, Saigon Times, Aug 2017 by CapitaLand & Vingroup.
THE DOOR TO ASEAN PROPERTY 60 RESIDENTIAL VIA LISTED EQUITIES PROPERTY PRICE INDICES VIETNAM
HCMC apartments – primary market
New launches, gross Net take-up Price index (2012 = 100) Apartment prices have appreciated at a 5-6% CAGR since the market bottomed in late 2013. (Units) (2012=100) 18,000 130 Vietnam’s local property consultants focus on reporting 16,000 125 launches and sales, less so on pricing. 14,000 120 12,000 115 JLL’s data remove pricing fluctuations caused by sudden 110 10,000 changes in supply. New supply entering the market can 105 8,000 100 temporarily skew average prices, as the supply base 6,000 95 remains small. 4,000 90 2,000 85 The Savills Property Price Index is available every quarter. - 80 In quarters when mid/high-end supply enters the market, their indices skew up.
Source: JLL, Maybank Kim Eng estimates
Hanoi apartments – primary market
New launches, gross Net take-up Price index (2012 = 100) (Units) (2012=100) 12,000 110
10,000 105 8,000 100 TAKEAWAY 6,000 95 4,000 90 JLL and Savills provide fairly consistent pricing 2,000 85 data that are publicly available. - 80
Source: JLL, Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 61 RESIDENTIAL VIA LISTED EQUITIES INCOME GROWTH VIETNAM
Income for the top 20% income earners in Ho Chi Minh HCMC - monthly income per capita (quintile 1 = lowest, quintile 5 = highest) City grew the fastest, at a 15.6% CAGR, during 2004-14, according to the World Bank. Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5 Growth for the other quintiles was 13-16%. VND ‘000 Property market currently appears to be mainly serving 14,000 the top quintile.
12,000
10,000
8,000
6,000
4,000
2,000 TAKEAWAY
- HCMC’s property market serves the top 20% 2011 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 income earners, whose income grew at a CAGR of
Source: “Vietnam - Affordable housing : a way forward” by the World Bank 15.6% during 2004-14.
THE DOOR TO ASEAN PROPERTY 62 RESIDENTIAL VIA LISTED EQUITIES AFFORDABILITY RATIOS VIETNAM
Our calculations suggest that housing affordability is Affordability profile of a typical HCMC homebuyers reasonably good. Household type 1 2 3 4 It is healthy for the affordable/social-housing segment.
Social- Target housing segment High-end Mid-end Affordable Access to bank loans appears relatively easy for locals. housing The exception is social housing, where much paperwork is needed from both developers and homebuyers. Household disposable income (VNDm/mth) 100 50 25 10 The 30% downpayment norm should be stable. Developers Estimated addressable market (% of <3% 3-5% 5-10% >50% population) are required to complete a building’s foundation - typically also about 30% of costs - before Sale & Purchase Apartment size (sqm) 120.0 90.0 70.0 50.0 Agreements can be signed.
Apartment price (VNDb) 7.2 2.7 1.4 0.8 If rates were to increase by 100bps, we would expect ASPs to drop 4-8%, for banks to maintain mortgage-to- Unit price (VNDm/sqm) 60.0 30.0 20.0 15.0 income ratios.
Mortgage rate (%) 7.0% 7.0% 7.0% 5.0%
Loan to value (LTV) (%) 70% 70% 70% 70%
Downpayment (% of total value) 30% 30% 30% 30%
Tenure (years) 10 10 15 20
Mortgage to income ratio (%) 60% 45% 36% 35% TAKEAWAY Price to income ratio (x) 6.0 4.5 4.7 6.3 Housing affordability is reasonably good. Source: Maybank Kim Eng estimates Particularly so for affordable / social housing.
THE DOOR TO ASEAN PROPERTY 63 RESIDENTIAL VIA LISTED EQUITIES AFFORDABILITY RATIOS VIETNAM
Housing affordability: Home price to income ratio Housing has become more affordable in Vietnam, as income (x) 2009 2013 2017 catches up with property prices. 10 Compared with Singaporeans, the Vietnamese appear to enjoy lower price to income ratios. But they face higher mortgage 8 servicing ratios as Vietnamese banks provide much shorter 6 loan tenures, of 10-15 years.
rd 4 For Singapore, we use the 3 highest decile in household income against the price of a mass-market private 2 condominium. For Vietnam, we use the top quintile against the price of an average apartment, excluding social housing. 0 SG VN We believe the top quintile will remain the addressable Source: Maybank Kim Eng estimates market in Vietnam for some years to come.
Housing affordability: Mortgage servicing ratio
(%) 2009 2013 2017 200
150
100 TAKEAWAY 50 The Vietnamese appear to enjoy low price to income 0 SG VN ratios, but face high mortgage servicing ratios as
Source: Maybank Kim Eng estimates banks provide short loan tenures.
THE DOOR TO ASEAN PROPERTY 64 RESIDENTIAL VIA LISTED EQUITIES RISKS & RETURNS FOR DIFFERENT ASSET CLASSES VIETNAM
Assumptions: 30%
Investment profile: USD10m, 3-year horizon 20% Location: District 2, HCMC (except listed equities) 10% 100% equity (unlevered)
0% Returns are net of tax, applied liquidity haircuts* but before transaction costs/ management fees -10% Base-case assumptions: - >6% GDP growth and 5% inflation. -20% Bear-case assumptions: lower GDP growth by 50-100bps and 100bps increase in interest rates. -30% Listed equities Private equity Private equity 3,000sqm land $200k $200k $1m villas - 2ha - 1ha office site apartments apartments (primary, buy- residential development (secondary, (primary, buy- to-sell) development buy-to-let) to-sell)
Upside (3-yr CAGR) Downside (3-yr CAGR) - with liquidity haircuts Avg upside Avg downside
* Liquidity haircuts at the end of investment horizon: 20% for land, 30% for private equity, 5-7% for apartments, TAKEAWAY 10% for villas and 0% for listed equities Source: Maybank Kim Eng estimates Taking into account foreign-ownership restrictions, buying listed equities and See page 75 for more details. investing in development SPVs seem best.
THE DOOR TO ASEAN PROPERTY 65 RESIDENTIAL VIA LISTED EQUITIES LISTED PLAYERS HAVE DOMINANT MARKET SHARE VIETNAM
Money flows into real estate (2009-18 YTD) Listed property developers have expanded from 80 in 2016 to 101, on all bourses. The top 15 largest have median ADTV of FDI registration into real estate (L) close to USD1m. Most are still far from foreign-ownership limits of 49%. Foreign buying into listed real estate equities (gross) (L) (USDb) (%) Stock market cap (all bourses), % of GDP (R) Large listed developers such as Vingroup, Novaland and Dat 9.0 80 Xanh have estimated market shares in excess of 30% in their market segments. As such, they are good proxies. 8.0 70
7.0 60
6.0 50 5.0 40 4.0 30 3.0
20 2.0
1.0 10
0.0 0 TAKEAWAY 2011 2009 2010 2012 2013 2014 2015 2016 2017 2018 YTD 2018 Listed equities now provide fairly Source: CEIC, FiinPro, Bloomberg, Maybank Kim Eng comprehensive exposure to real estate in Vietnam, with high liquidity.
THE DOOR TO ASEAN PROPERTY 66 RESIDENTIAL VIA LISTED EQUITIES EXPOSURE TO VOLUME & PRICE GROWTH VIETNAM
Total apartment transactions in primary market Over 2013-17, property equities rose faster than physical (Units) HCMC Hanoi property prices. 100,000 Listed equities offer exposure to industry volume growth as 80,000 modern housing penetration in Vietnam remains low. 60,000 Apartment transactions in HCMC & HN grew at a 60% CAGR in 40,000 2013-14, although growth decelerated to 14% in 2017. Major 20,000 listed developers also offer RNAV-accretive land-bank growth.
0 3-year base-case scenario: expected annual returns: 21% (10% volume growth, 5% price growth, 5% land bank growth) 2013 2014 2015 2016 2017
Source: JLL 3-year bear-case scenario: expected annual returns: -19% (-15% volume growth or reverting to 2014-17 mean, -5% price growth) Apartment price indices vs listed equities (Top 15 stocks)
HCMC apartment prices Hanoi apartment prices Property stock price performance 80% 67% 70% 60% 50% 40% 30% 15% 17% 20% 9% 6% 6% 7% 6% 8% 10% -13% 3% 2% 3% TAKEAWAY 0% -10% -2% -3% -20% 2013 2014 2015 2016 2017 As modern housing penetration remains low, listed Source: JLL, Bloomberg, Maybank Kim Eng equities offer exposure to market volume growth.
THE DOOR TO ASEAN PROPERTY 67 RESIDENTIAL VIA LISTED EQUITIES EQUITIES OFFER EARNINGS VISIBILITY & LAND-BANK SCALABILITY VIETNAM
Dat Xanh (DXG): Residential brokerage a proxy for industry growth We look for two main criteria: (%) 1. Earnings visibility: market historically rewards property 20 stocks with low forward P/Es. Dat Xanh (DXG VN, Not Rated), a participating corporate at IASG 2018, guides for 10 18% PATMI growth in FY18. Aside from property developments, its residential brokerage unit is also a proxy for industry growth. 0 2. Land-bank scalability: large scale land acquisitions can -10 be difficult. Van Phu-Invest (VPI VN, Not Rated), also FY12 FY13 FY14 FY15 FY16 FY17 participating in IASG 2018, appears to have a platform to EVA spread WACC ROIC scale up its land bank via build-transfer (BT) infrastructure work.
Source: Company data
Van Phu-Invest (VPI): Build-transfer infrastructure likely has good economics Gross margins from property sales (exc. en-bloc project sales)
60%
50% 40% TAKEAWAY 30% 55% 45% 20% 40% Look for earnings visibility & land-bank 36% 37% 34% 33% 30% 33% 30% 31% 31% 30% 33% 10% 20% 22% scalability, particularly in SMID property stocks. 0% 2015 2016 2017 2015-17 overall
VPI NLG KDH DXG
Source: Company data
THE DOOR TO ASEAN PROPERTY 68 RESIDENTIAL VIA LISTED EQUITIES ATTRACTIVE VALUATIONS OF PROPERTY SMIDs VIETNAM
Aggregate margins and leverage for top 20 real-estate SMID stocks Despite pricing improvements, as reflected in operating (%) (x) margins, and rapidly deleveraging balance sheets, property Operating margin (L) Debt/EBITDA (R) SMIDs have been overlooked by the market. 25 14.0 12.0 SMIDs’ P/Es are hovering around their 3-year averages. 20 10.0 Attractive in the current environment, with reasonable 15 8.0 housing affordability and a growing economy. 10 6.0 4.0 5 2.0 0 0.0 Jul-17 Jul-16 Jul-15 Jul-14 Jul-13 Jan-17 Jan-17 Jan-16 Jan-16 Jan-15 Jan-15 Jan-14 Jan-14 Jan-13 Jan-13 Sep-17 Sep-16 Sep-15 Sep-14 Sep-13 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Nov-17 Nov-16 Nov-15 Nov-14 Nov-13 May-17 May-17 May-16 May-16 May-15 May-15 May-14 May-14 May-13 May-13
Source: Bloomberg, Maybank Kim Eng
Aggregate P/E for top 20 real-estate SMID stocks
Trailing PER Mean Mean+1SD Mean-1SD 30.0 25.0 20.0 15.0 TAKEAWAY 10.0 5.0 0.0 Overlooked, property SMIDs trade at attractive multiples. Jul 14 Jul 15 Jul 16 Jul 17 Jan 15 15 Jan Jan 16 16 Jan Jan 17 17 Jan Jan 18 18 Jan Sep 14 Sep 15 Sep 16 Sep 17 Mar 15 Mar 16 Mar 17 Nov 14 Nov 15 Nov 16 Nov 17 May 15 15 May May 16 16 May May 17 17 May
Source: Bloomberg, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 69 RESIDENTIAL DEVELOPMENT IN DISTRICT 2 LAND AT REASONABLE PRICES VIETNAM
District 2 will provide the bulk of HCMC’s new apartment supply in 2018-19 District 2 in HCMC is adjacent to CBD (District 1), separated by Saigon River. Its flagship township Thu Thiem (657ha) has been positioned as HCMC’s “Pudong”. District 2 should provide the bulk of new apartment supply in HCMC in 2018-19. This will likely lead to further improvements in amenities in the district. 46% Divergent land prices in District 2. Much land remains vacant 54% due to unsynchronised urban planning. We believe it is possible to purchase sizeable land at reasonable prices, develop mid/high-end residential apartments and “free-ride” improved amenities.
District 2 All other 23 districts combined
Source: Savills, 2017 Q4
Land prices in District 2 still vary widely
Asking price (USD/ sqm)
14,000 12,000 10,000 8,000 TAKEAWAY 6,000 4,000 Purchase land for development in District 2 & 2,000 “free-ride” expected improvements in amenities. - 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0
Land area (ha)
Source: www.batdongsan.com.vn, March 2018
THE DOOR TO ASEAN PROPERTY 70 RESIDENTIAL DEVELOPMENT IN DISTRICT 2 IRR: 19% VIETNAM
Assumptions underlying development of mid-end apartments: Cash-flow estimates for a theoretical 2ha residential development in District 2 Land area: 2ha (USDm) Cash inflows Cash outflows Net cashflows Plot ratio: 8.0 100 Land cost: USD1,100/sqm of land area Construction cost: USD700/sqm of GFA 80 Selling price: USD1,400/sqm of NSA Inflation: 5% pa 60 SG&A/revenue: 15%
40 Corporate income tax: 20% Base-case IRR: 19% 20 Bear-case IRR: -6%, including a liquidity haircut equivalent to a 30% RNAV discount at the end of the investment horizon
0
-20
-40 TAKEAWAY
-60 FY0 FY1 FY2 FY3 SPVs could offer more location-specific exposure than listed equities.
Source: Maybank Kim Eng estimates
THE DOOR TO ASEAN PROPERTY 71 OFFICE DEVELOPMENT IN DISTRICT 2 OFFICES ARE UNDERBUILT VIETNAM
Office supply growth has been below GDP growth in HCMC and HCMC’s office market vs Economic growth Hanoi in past five years.
(%) Office stock growth Real GDP growth Vacancy Despite strong supply in 2017, vacancy rates are at all-time lows: 12 4% in HCMC, 7% in Hanoi. 10 8 While some new supply could be frontloaded in 2018 in Hanoi, 5.1 6 HCMC’s 2018 supply growth seems low, at 5%. 4 2 JLL and Savills data indicate supply in HCMC and Hanoi will probably only grow by 5-10% pa in next three years. 0 2013 2014 2015 2016 2017 2018F CBD supply in HCMC in next 1-2 years will likely be limited. A Source: JLL, CEIC, Maybank Kim Eng handful of projects under construction appear to be on hold indefinitely, possibly due to financing issues.
Hanoi’s office market vs Economic growth
(%) Office stock growth Real GDP growth Vacancy 25
18.8 20
15 TAKEAWAY 10 Vietnam has underbuilt offices in the past five 5 years.
0 2013 2014 2015 2016 2017 2018F
Source: JLL, CEIC, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 72 OFFICE DEVELOPMENT IN DISTRICT 2 ATTRACTIVE CAP RATES VIETNAM
Cap rates vs Risk-free rates
Using data from Vingroup’s IFRS financial statements, cap rates Spread (R) for prime office and retail properties have been roughly equal in Average prime commercial real estate cap rate (L) (*) (%) (%) past five years. 5-yr government bond yield (L) 12 5.0 Even though cap rates have been compressed by an economic 10 4.0 upcycle and stable FX, their spread against risk-free rates 8 remains high. 3.0 6 HCMC’s strong economic growth has been and will likely 2.0 4 continue to be driven by services. With District 2 positioned as 1.0 HCMC’s new commercial hub, more corporates are likely to base 2 their headquarters here in the future. 0 0.0 2013 2014 2015 2016 2017 We think risks are on the upside. Cap rates may be compressed further, given the supply/demand outlook. (*)for office/retail properties in Vincom Center Dong Khoi in HCMC and Vincom Center Ba Trieu in Hanoi Source: Vingroup, Cushman & Wakefield, Bloomberg, Maybank Kim Eng estimates
HCMC: Services as a % of GDP (nominal)
62% 60% 58% 56% 54% 52% TAKEAWAY 50% 48% Cap rates have been compressed but spreads 46% remain high. Given the supply/demand outlook, 44% risks are on the upside. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: CEIC, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 73 OFFICE DEVELOPMENT IN DISTRICT 2 EXPECT RENTS TO BE STABLE VIETNAM
Achieved net rents in HCMC (excluding service charge and VAT) Assumptions underlying office development in District 2: Land area: 0.8ha (USD/sqm/mth) Grade A Grade B Plot ratio: 7.0 45.0 Land cost: USD4,400/sqm of land area
40.0 Construction cost: USD900/sqm of GFA Base rent: USD25/sqm/mth (on NLA) 35.0 Pre-commitment at completion: 80%
30.0 Corporate income tax: 20% Base-case IRR: 27% 25.0 Bear-case IRR: -29%, including a liquidity haircut equivalent to a 30% RNAV discount at the end of the investment horizon 20.0
15.0
10.0
5.0 TAKEAWAY -
2012 2013 2014 2015 2016 2017 SPVs could also offer exposure to offices. Source: JLL
THE DOOR TO ASEAN PROPERTY 74 APPENDIX RISK-RETURN SCATTER CHART VIETNAM
Why choose District 2? Visible infrastructure support, diverse investment universe, open to foreigners Risk-return trade-offs for real-estate asset classes Base case: GDP growth: >6% pa nationwide, 10% pa in tier-1 cities; real-estate transaction volume growth: 10% pa; Private equity - 30% interest rates: flat; inflation: 5% pa; ASP growth: 5% pa 1ha office development Bear case: 1) macro risks such as global trade declines, geopolitical instability. GDP growth declines: 0.5-1.0% pa; real-estate volume declines: 15% pa; 2) rate hikes: 100bps 25% Private equity - pa; ASP declines: 4-8% pa 2ha residential development Listed equities 3,000sqm land site Physical properties: total returns from capital appreciation 20% and yields not too high, but least exposed to market risks. Also, splitting USD10m into dozens of units can be cumbersome. 15% $200k apartments Listed equities: highly liquid and offer exposure to volume (primary, buy-to- growth, but cannot provide exposure to particular up-and- sell) coming districts such as District 2 in HCMC. 10% Private equity: can have exposure to a particular district, is Upside (3-yr (3-yr Upside CAGR) $200k apartments less exposed to market risks than listed equities, but local (secondary, buy-to- $1m villas networks are needed to set up SPVs. (primary, buy-to- let) 5% sell) Land: easier to find than private equity, potentially higher returns than public equities, but legal ownership is problematic. Also, small-scale land plots seem overpriced vs 0% some of the larger development sites. 0% -5% -10% -15% -20% -25% -30% -35% Downside (3-yr CAGR) TAKEAWAY
Source: Maybank Kim Eng estimates Listed equities and residential & office development in District 2 offer favourable risk-return trade-offs.
THE DOOR TO ASEAN PROPERTY 75 FOREIGN OWNERSHIP RESTRICTIONS VIETNAM
Key restrictions on property investments in Vietnam
Foreign-ownership restrictions: Asset class Ownership limit Restricted tenure Financing options Listed equities: 49%. Most stocks are far from reaching this limit. Trades must be pre- 49% in each stock Not applicable Listed equities funded in Vietnam. Apartments: foreigners are allowed to own up to 30% of the units in an apartment building. 50-year leases, which Banks require borrowers can theoretically be extended, as long as owners are to have income source in 30% of total units in a foreigners. Once a property is transferred to a local, 50-year leasehold Vietnam; may also Apartments building ownership will be converted to a freehold basis. require a Vietnamese spouse. Low-rise housing: foreigners are allowed to own up to 250 Banks require borrowers low-rise units in one administrative ‘ward’. This is one to have income source in 250 of total units in an level below ‘district’. The same tenure regulation applies. 50-year leasehold Vietnam; may also Landed housing administrative ward. require a Vietnamese spouse.
Not allowed for foreign Not allowed for foreign Not allowed for foreign Land plots individuals individuals individuals
Development land of all types (residential, 50-year leasehold for Developers have access Not applicable commercial, developers to capital markets TAKEAWAY industrial) Listed equities offer the easiest way to gain exposure to Vietnam’s property.
Source: Land Law (2013), Housing Law (2014), Securities Law (2010, revised)
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THE DOOR TO ASEAN PROPERTY 78 THAILAND Maria Lapiz (66) 2257 0250 [email protected] THE DOOR TO ASEAN PROPERTY
EQUITIES THE SAFEST BET, WITH PROMISING RETURNS
Demand is generally sluggish. Only high-end demand is robust, sustained by income growth. Regulations limit foreigners’ participation. We recommend listed developers with exposure to high-end residential: LH, SPALI & PSH.
MANAGED CARE: A GROWING AREA OF INTEREST
With ageing and the nuclearisation of families, demand for managed healthcare facilities is expected to increase. Listed hospitals BDMS, VIBHA & BCH; privately- owned THG; and state-owned RAMA have rolled out healthcare-related projects.
NEW TOURISM INITIATIVE IN THE SOUTH
Government plans to develop 200km of coastline into a Thai Riviera for tourists, spurring infrastructure development in the south. First to be completed will be a train from Bangkok to Hua Hin, cutting travel time to 1.5 hours. ERW’s various hotel brands can cater to a vast swathe of tourists.
March 2018 79 EQUITIES THE SAFEST BET, WITH PROMISING RETURNS DETERIORATING DEMOGRAPHICS: LOW POPULATION GROWTH, THAILAND AGEING SOCIETY
Population enters low growth Thailand’s population growth has decelerated in past two decades, to less than 1%. Fertility rate is the lowest in ASEAN : million persons % Thailand 1.5, Indonesia 2.4, Vietnam 2, Philippines 3. 68.0 1.5 66.0 1.0 Those above 55 years formed 25% of 2016 population. 64.0 0.5 0.4 Affordability and wealth rest mainly with older generation. 62.0 0.0 Wealth and inheritance distribution should spur property 60.0 -0.5 purchases, at the high end. 58.0 -1.0
56.0 58 59 59 60 61 61 62 62 62 63 63 62 62 63 63 63 64 64 64 64 65 65 66 66 66 -1.5 General population’s disposable income has flattened amid high 54.0 -2.0 household debt. 1993 1996 1999 2002 2005 2008 2011 2014 2017 Population % growth
Source: Ministry of Interior
Gross disposable income and household debt
THBb 13,000 HH debt to GDP (3Q17) = 78.3% 11,000 HH debt to disposable income (2016) = 144.8% TAKEAWAY 9,000
7,000 Slow population growth & weak income narrow the 5,000 pool of potential buyers. 10,548 11,103 11,486 11,763 5,260 4,693 5,630 5,089 5,629 5,590 6,142 6,406 6,516 7,484 7,058 8,870 7,219 9,893 7,478 7,555 7,932 3,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 3Q17 Gross disposable income HH debt
Source: NESDB, BOT
THE DOOR TO ASEAN PROPERTY 80 EQUITIES THE SAFEST BET, WITH PROMISING RETURNS WEAK HOUSEHOLD BALANCE SHEETS THAILAND
Thailand statistics 2017 Increase in household income in 2017 was the result of government stimulus programme for provincial areas & small Greater BKK Nationwide businesses. Cost THB1.3t or nearly 1% of nominal GDP. Monthly household income (THB) 41,335 26,973 % growth from 2013* (4) 7 Housing as percentage of consumption expenditure rose to 21% Housing as % of consumption expenditure 23% 21% from 19.3% in 2013. Mortgage rate (%) 6.4% 6.4% Home price to income ratio (x) 5.1 6.6 A 100bps increase in interest cost raises debt servicing ratio to Debt service ratio (%) 30.6 39.3 33% for Bangkok and 43% nationwide. These are too high.
Sensitivity +100bps** Overall capital values have been muted. Prices have escalated Home price to income ratio (x) 8.0 7.6 for high-end condos, especially near mass transit facilities and Debt service ratio (%) 33.8 43.5 the CBD. * the last previous survey ** in period of interest rate hike banks pre-emptively offer refinancing extension of tenure
Source: NSO, BOT
Residential price index
(Jan 09 = 100) Condominium SDH TH 200 TAKEAWAY 180 160 Households have limited room to absorb spikes in 140 interest costs. Banks will have to restructure 120 mortgages, essentially refinancing with loan 100 80 repayment extensions. 2009 2010 2011 2012 2013 2014 2015 2016 2017
Note: SDH – single detached house, TH – townhouse Source: BOT
THE DOOR TO ASEAN PROPERTY 81 EQUITIES THE SAFEST BET, WITH PROMISING RETURNS DETERIORATING DEMOGRAPHICS THAILAND
Population ageing Younger population of 26-44 years is a potential source of demand, but formed only 31% of 2016 population. Also has 100% >65 uncertain income outlook & retrenchment prospects. 11% 90% 12% 55-64 80% Demand has been slowing since late 2000s, excluding a 70% 16% 45-54 temporary surge after the Great Floods of 2011 that lasted till 60% Affordability group mid-2012. 50% 16% 35-44 40% 14% 25-34 30% 20% 15-24 10% 0% 0-14 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Ministry of Interior
Growth in condos sales has been slowing
Impact of Great Flood 400% Urbanization 300% 200% TAKEAWAY 100% 0% Younger population has limited buying power. This -100% is reflected in slow buying of units. -200% 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Nationwide BKK Other Provinces
Source: BOT
THE DOOR TO ASEAN PROPERTY 82 EQUITIES THE SAFEST BET, WITH PROMISING RETURNS GO FOR BIG PLAYERS: LH, SPALI, PSH THAILAND
Developers and their share prices Developers and their brands % 50 40 37 40 26 30 22 20 14 20 12 11 7 9 10 4 4 4 4.3 3 0
-10 -5 -3.1 -8 -5 -5 -6 -20 -18 -15 -30 -24 AP LH LPN PSH QH SPALI ResProp SET
2016 2017 YTD
Launch plans of the big developers
THBm +13% 80,000 70,000 +0.1% 60,000 +28% 50,000 +260% TAKEAWAY 40,000 +10% +66% 30,000 20,000 In residential property, the top six developers have
10,000 49,040 49,070 10,080 36,300 16,430 18,000 59,200 66,700 7,800 12,982 31,220 40,000 0 strong branding & long track records. AP LH LPN PSH QH SPALI
2017 2018E
Source: Companies, Bloomberg
THE DOOR TO ASEAN PROPERTY 83 EQUITIES THE SAFEST BET, WITH PROMISING RETURNS POTENTIAL FOR HIGH RETURNS THAILAND
LH’s prospective returns SPALI’s prospective returns PS’ prospective returns
Investment Returns (LC) 1Y 3Y Investment Returns (LC) 1Y 3Y Investment Returns (LC) 1Y 3Y Share price (THB) 10.9 Share price (THB) 22.2 Share price (THB) 22.7 SoTP Target Price (THB) 12.6 14.3 SoTP Target Price (THB) 26.8 30.7 SoTP Target Price (THB) 28.0 34.4 Capital gains 16% 31% Capital gains 21% 38% Capital gains 23% 51% Dividend yield - pre tax 6% 20% Dividend yield - pre tax 6% 17% Dividend yield - pre tax 9% 26% Expected Total Return - 12M 22% 51% Expected Total Return - 12M 27% 56% Expected Total Return - 12M 33% 78%
… dividend yield profiles … dividend yield profiles … dividend yield profiles
8% 17% 10% 8% 6% 12% 6% 4% 7% omit 4% 2% 2% 2% 0% 2011 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 E 2019 E 2020 E 2018 E 2019 E 2020 E 2018 E 2019 E 2020 E
To launch THB36b worth of projects this year In 2017, SPALI issued 25% convertible In 2016, PSH restructured the group for vs THB10b in 2017. warrants & waived dividends. Share price business diversification to enhance recurring collapsed 20%. income. It waived dividends that year. Its THB22.5b investment portfolio generates 31% of reported net profits in past five years. Then it acquired a 7.8 rai Australian Since then, PSH has yet to articulate its long - Converted into cash dividends Embassy site that will be developed into a term strategy clearly, creating a share-price mixed-use property worth THB17b. Project overhang. should produce recurring income in the Our forecasts suggest flat net profits but there could be upside from the sale of one of its next 15 years, at the minimum. We expect better clarity in mid-2018. 2018E investment properties profits expected to grow 22% with high High 48% revenue visibility for 2018E, presales & strong launch plan. Weakness in share price due to overhang of strong pipeline of THB40b launches. the awaited final sale of GIC stake in next two Failure to provide clarity could cap its share months. price.
THE DOOR TO ASEAN PROPERTY 84 MANAGED CARE: A GROWING AREA OF INTEREST HIGH DEMAND FOR ELDERLY HOME CARE THAILAND
Family size vs trend of those aged 60+ & above staying alone The number of elderly staying alone is rising due to: i) ageing and falling birth rates; ii) declining family sizes; and iii) population 6 migration to urban areas in search of work. 4.8 4.4 5 Ageing demographic is growing the fastest, increasing need 4 3.1 3.0 for elderly care. 3.8 3 2
1
0 1994 2002 2007 2011 2014
Family size (LHS) Trend of elderly aged 60+ staying alone (RHS)
Source: Department of Public Health, National Statistical Office of Thailand
Percentage of elderly needing daily assistance (2016)
100% 2% 1% 1% 2% 3% 95% 12% 13% 90% 19% 20% 85% TAKEAWAY 80% 34% 75% 87% 86% Senior housing needs may grow big enough for 70% 80% 79% 65% some developers to cater to. 64% 60% Total 60-64 65-69 70-74 >75
Active Home bound Bed bound
Source: Department of Public Health, National Statistical Office of Thailand, Companies
THE DOOR TO ASEAN PROPERTY 85 MANAGED CARE: A GROWING AREA OF INTEREST ANTICIPATED DEMAND GROWTH THAILAND
Announced managed-care propositions As people age, more will become home- & bed- bound.
Developer Sector Investment (THBm) Demand for home care for the elderly should rise. Thonburi Healthcare Group - THG Hospital 4,400 Vibhavadi - VIBHA Hospital not yet disclosed Developers have identified sites for elderly care facilities in Bangkok Chain Hospital (BCH) Hospital 100-200 Bangkok, Phuket & Chiang Mai. These also happen to be the top Bangkok Dusit Medical Service (BDMS) Hospital 2,000 tourist destinations. Chiang Mai, in the past 10 years, has evolved Ramathibodi (State-owned) Hospital not yet disclosed into a retirement destination for foreigners. Pruksa Holding (PSH) Residential developer not yet disclosed LPN Development (LPN) Residential developer 8,200 Kamala (not listed) Resort operator 3,500
Developer Project Description Thonburi Healthcare Group - THG Jin Well-being County: comprehensive residential complex for retirees and families Vibhavadi - VIBHA To invest in community malls & residences for elderly in Chiang Mai Bangkok Chain Hospital (BCH) Studying senior care communities for both Thais and foreigners Bangkok Dusit Medical Service (BDMS) Plans to open BDMS Wellness Clinics focusing on longevity and anti- ageing remedies Ramathibodi (State-owned) Negotiating with Treasury Department to develop senior complexes Pruksa Holding (PSH) Adding features for elderly buyers in various projects TAKEAWAY Plans to diversify into hospitals and managed-care projects LPN Development (LPN) Launched two senior home-care low-rise projects in Bangkok and Pattaya Senior housing needs may balloon to a space big Kamala (not listed) Set up to develop an upscale lifestyle senior living village in Phuket enough for developers to create viable solutions.
Source: Companies, MKE-ISR
THE DOOR TO ASEAN PROPERTY 86 MANAGED CARE: A GROWING AREA OF INTEREST BDMS OFFERS THE MOST VIABLE ACCESS THAILAND
Direct investments Still in rollout phase. Completion due in 2019/20. Potentially attractive propositions are: THG, VIBHA and BDMS. Jin Well-being County Project 1 – JV with THB4,400b THG Thonghe Group (Chinese – Hospital Operator) Jin Well-being County welcomes foreign buyers. WEGO – (Chinese – Medical Device Producer) Ga Mone Pwint (Real Estate) THG welcomes partners for Jin Well-being County Phase 2 in the Potential targeted IRR 8-10% following areas of expertise: real-estate development, Phase 2 equipment/technology and/or hospital operations Residential for the elderly Not yet disclosed Principal stakeholders of VIBHA (Viriyamethakul Family) acquired Community Mall/Residential Ownership Structure 2,000 rai secured land a long time ago cheaply. Also own 80% of Chiang Mai Ram For the Elderly Welcomes JV partners 3.2m sq m Hospital that operates nearly 2,000 beds, including for Social VIBHA Security patients. Given its market share of 19% in the north, its Potential targeted IRR > 15% IRR is very high, at no less than 15%.
THB12b; THB10b for We prefer BDMS in the managed-care business. Purchasing the BDMS Wellness Clinics 100% owned by BDMS land stock at this level offers 1Y/3Y estimated total returns of 7%/23% BDMS Not Disclosed and an option value in BDMS Wellness Clinics. Potential targeted IRR > 13%
Via equities: BDMS provides the best access
• Low 1Y expected total returns TAKEAWAY Investment Returns (LC) 1Y 3Y reflect BDMS’ nascent margin recovery, from hospitals Share price (THB) 22.8 opened 2-3 years ago. Target price (THB) 24 27 BDMS offers the most viable access to managed Capital gains 5% 18% • Wellness Clinics can bring 16% care. Dividend yield - pre tax 1.4% 4.5% upside to our 2020 forecasts. Expected total returns 7% 23% Not yet captured in our valuation.
Source: Companies, MKE-ISR
THE DOOR TO ASEAN PROPERTY 87 MANAGED CARE: A GROWING AREA OF INTEREST SAMPLE PROJECTS THAILAND
Jin Well-being County by THG: IRR 8-10% (Phase 1)
Active Living - 13 seven-storey residential 1,300 units. First two clusters open for sale: 500 units (43-63 sqm size) at THB3.6m. Aged Care Centre for day care & nursing home services + rehab centre. Clubhouse & Wellness Centre: spa, fitness, pool, health & services focus on prevention. Close to Don Muang Airport & Red Line Mass Transit.
Wellness Clinic by BDMS: 13% IRR
378 hotel rooms. Promenade Building 31,000 sqm. Located in Bangkok’s CBD on Wireless Road.
Wholly-owned Source: Companies
THE DOOR TO ASEAN PROPERTY 88 NEW TOURISM INITIATIVE IN THE SOUTH THAI RIVIERA THAILAND
Thai Riviera The number of “main” destinations in Thailand has been unchanged for 20 years.
In 2017, the government made a push into secondary destinations. Not much results yet. 2M18 traffic flow was in fact down in the south (-2.9%) and north (-0.6%).
New initiative is the Thai Riviera, on a 200km coastline in the west. Straddles four provinces: Phetchaburi, Prachuab Kiri Khan, Chumphon and Ranong.
Extension of Hua hin route The east draws more tourists. Pattaya alone welcomed 10m under study tourists in 2017, mostly foreigners. The four western provinces captured just 16.5m local and international tourists.
A fast train from Bangkok to Hua Hin should become operational by 2022. Its extension to Ranong province is under study.
Secondary city airports’ traffic flow Under AOT management Under DOA management South %Chg YoY Northeast %Chg YoY North %Chg YoY Central & West %Chg YoY Feb-18 2M18 Feb-18 2M18 Feb-18 2M18 Feb-18 2M18 Chumphon 3.0% 1.4% Loei -5.8% -7.2% Mae Hong Sorn -5.5% -9.9% Phitsanulok 29.6% 30.6% Ranong 53.5% 30.0% Udon Thani -4.1% -6.5% Lampang 4.7% 3.3% Tak (Mae Sot) 20.3% 21.8% Surat Thani -2.7% -8.2% Nakhon Phanom 5.8% 5.8% Phrae 4.9% 5.1% Bangkok (Don Mueang) 9.5% 8.5% Nakhon Si Thammarat -2.0% 11.0% Sakon Nakhon 4.0% 0.4% Nan -1.8% -2.8% Bangkok (Suvarnabhumi) 5.3% 4.7% Krabi 1.8% -3.8% Khon Kaen 4.8% -3.4% Chiang Mai 9.1% 7.6% Trang -7.6% -0.4% Roi Et 25.7% 21.6% Chiang Rai 15.4% 13.9% Narathiwat -17.2% -25.1% Ubon Ratchathani 9.2% 7.3% Phuket 22.8% 16.9% Buriram 34.2% 31.9% Songkhla (Hat Yai) -2.1% -4.5%
Total 12.4% 8.0% Total 3.9% 0.5% Total 9.7% 8.2% Total 7.0% 6.2% AOT's airports 18.3% 12.9% AOT's airports na na AOT's airports 10.3% 8.7% AOT's airports 6.9% 6.1% DOA's airports -0.1% -2.9% DOA's airports 3.9% 0.5% DOA's airports 0.8% -0.6% DOA's airports 27.0% 28.3%
Source: Companies, MKE-ISR, AOT, DOA
THE DOOR TO ASEAN PROPERTY 89 NEW TOURISM INITIATIVE IN THE SOUTH ERW PROVIDES BEST EXPOSURE TO THAI RIVIERA THAILAND
Thailand: 37-38m visitor target for 2018 Investing in land assets along the west coast would be the most ERW’s return profile lucrative way to cash in but is cumbersome.
We expect a surge in hotel build-up in western provinces as Investment Returns (LC) 1Y 3Y private investors move ahead of the plan. Share price (THB) 7.9
Target price (THB) 9 11 ERW’s hotels are in the right price range, including Hop Inn at THB600/day. Its various hotels can cater to a wide variety of Capital gains 14% 39% tourists. Investment cost is only THB80-100m per Hop Inn. Low Dividend yield - pre tax 0.9% 2.7% buildings and simple designs translate into faster construction. Expected total returns 15% 42%
Listed hotels with properties in the Riviera
ERW Rooms CENTEL Rooms MINT Rooms Centara Grand Hua ibis Hua Hin 200 Hin 249 Anatara Hua Hin 187 Hop Inn Chumphon 79 AVANI Hua Hin 196 Hop Inn Hua Hin 79 % of hotel inventories 5% 6% 4%
Source: Ministry of Tourism and Sports, Companies, MKE-ISR
THE DOOR TO ASEAN PROPERTY 90 FOREIGN OWNERSHIP RESTRICTIONS THAILAND
Real estate asset class and considerations
Land ownership by foreigners is prohibited under Alien Business Act. Yes No Comments Land ownership X Exception for juristic entities, investing in BOI- promoted locations & specific industrial areas 49% is the guiding number for direct stakes & condos that are JV partnerships for X Maximum 49%, but there are loopholes that can be registered as “open” to foreigners etc. property-related ventures exploited Foreign purchases of X For projects pre-registered to be opened to foreigners, Several regulatory pitfalls for land titles, land use & condominiums limited to 49% of their total number of units environmental requirements. Ad-hoc restrictions on density and Second-hand market X Not visible. Sales can happen but take a long time and project types. typically at low prices Locals have natural preference for new units
Funding X Domestic banks do not provide loans to foreigners for buying property There is no rule against this but they prefer not to A foreigner can seek funding but loan has to be guaranteed by a Thai national Guarantors will assume full liabilities if the loans turn sour Land titles There are many types of land titles and extreme care must be exercised to ensure the title deeds are transferrable to third parties. Also need to check the allowed purposes Regulatory limitations X Some areas are restricted to high-rise development Environmental laws X Projects must seek EIA. Bigger projects must seek H-EIA approval. Rules are amended all the time Limitations on density X New developments may not be allowed for areas identified TAKEAWAY as dense. Rules are amended all the time Be cautious when entering into property ventures of any kind.
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THE DOOR TO ASEAN PROPERTY 92 INDONESIA Aurellia Setiabudi (62) 21 8066 8691 [email protected]
THE DOOR TO ASEAN PROPERTY LOW-END MASS HOUSING OPPORTUNITIES Low-end mass housing near upcoming transport infrastructure in high demand. Exposure via Ciputra. Sell mid-high-end houses from weak demand & large potential supply of new apartment stock limit capital upside.
RISING DEMAND FOR INDUSTRIAL LAND
Manufacturing capacity utilisation nears all- time high. E-commerce to add to demand for industrial land amid increasing scarcity of supply.
SOFT CAP RATES FOR COMMERCIAL
Sluggish demand for office & retail space. Office oversupply should persist until 2020. Retail threatened by e-commerce.
March 2018 93 LOW-END MASS HOUSING OPPORTUNITIES LOW-END SEGMENT UNDERSERVED INDONESIA
Household income distribution in Greater Jakarta Over 80% of Greater Jakarta’s households, or around 6m, falls into low- / low-mid-end segments. Home ownership is low in (millions) 5.0 these segments, at below 50%. 4.1 4.0 3.4 Price affordability for low end homes is IDR650m (USD50k), low- 3.0 2.2 mid-end IDR1.15b (USD85k). 1.6 2.0 1.4 0.8 1.0 0.8 The segments are severely underserved as most developers 0.5 1.0 0.3 0.1 0.3 target the mid-high-end segments. 0.0
Middle IDR500m) (IDR350m- IDR350m) Upper (IDR200m- Low-mid end Low-end Middle-Upper (below IDR70m) Not addressable (IDR500m-900m) (above IDR900m)
(IDR70m-IDR200m) 2017 2022F
Source: Euromonitor, Maybank Kim Eng
Price demand curve
(IDRm per unit) Price and demand curve 2,500
2,000
1,500 TAKEAWAY 1,000 Large and underserved low-end home market. 500 Potentially huge volumes. 0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 (Million units)
Source: Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 94 LOW-END MASS HOUSING OPPORTUNITIES SEVERELY UNAFFORDABLE MARKET INDONESIA
Based on Canback’s C-GIDD estimates and Euromonitor data, Affordability scale median household income per annum in Greater Jakarta is IDR138m or USD10,200.
China: Hong Kong 18.1 A typical residential unit costs IDR800m in Greater Jakarta. China: Mainland 12.8 Thailand 11.3 This implies a Greater Jakarta affordability ratio of 5.8x, which Inner Jakarta 7.1 falls into Demographia’s “severely unaffordable” band. Greater Jakarta 5.8 Malaysia 4.8 Singapore 4.5 Vietnam 4.3
0 2 4 6 8 10 12 14 16 18 20
Source: Demographia, Maybank Kim Eng
Demographia’s definition of affordability
Housing Affordability Rating Median Multiple
Affordable 3.0 & Under Moderately Unaffordable 3.1 to 4.0 TAKEAWAY Seriously Unaffordable 4.1 to 5.0
Severely Unaffordable 5.1 & Over Greater Jakarta’s property is severely unaffordable. A
Median multiple: Median house price divided by median household income supply & demand mismatch also exists.
Source: Demographia
THE DOOR TO ASEAN PROPERTY 95 LOW-END MASS HOUSING OPPORTUNITIES CITY WITH LOWEST HOUSE OWNERSHIP INDONESIA
Home ownership in Inner Jakarta is 50%, the lowest in the Housing stock and home ownership rate in Inner Jakarta country. Nationwide ownership is 80%. This is due to a supply & demand mismatch in the city.
(units) We estimate a household formation rate of 1.6% in the next five 1,600,000 60% years, from urbanisation and marriages.
1,400,000 50% 1,200,000 40% 1,000,000
800,000 30%
600,000 20% 400,000 10% 200,000 TAKEAWAY 0 0% 2009 2010 2011 2012 2013 2014 2015 2016 Low home ownership & household formation Housing stock in Inner Jakarta House ownership (RHS) provide natural sources of demand.
Source: BPS
THE DOOR TO ASEAN PROPERTY 96 LOW-END MASS HOUSING OPPORTUNITIES BUT HEALTHY INCOME GROWTH INDONESIA
Median household income in Greater Jakarta grew 110% in past Median household income 10 years. Minimum wage leapt 308%.
(IDRm) 200 40% With household income growing faster than home prices, we 30% expect affordability to improve gradually. 150 20% Indonesians are spending more on housing. Housing percentage of 10% 100 expenditure soared from 20% in 2000 to 29% in 2016. Housing 0% percentage of disposable income spiked from 6% to 13%. 50 -10% -20% 0 -30% 2005 2008 2011 2014 2017 2020F Median Household Income YoY Growth (RHS)
Source: Euromonitor, Maybank Kim Eng
Household expenditure on housing
(IDRm) 20.0 35% 30% 15.0 25% TAKEAWAY 20% 10.0 15% Minimum wage grow much faster than median 5.0 10% 5% household income, sustaining low-end demand. 0.0 0% 2000 2003 2006 2009 2012 2015 Housing & Household facility % of disposable income (RHS) % of total expenses (RHS)
Source: BPS
THE DOOR TO ASEAN PROPERTY 97 LOW-END MASS HOUSING OPPORTUNITIES BUY LOW-END INDONESIA
Mid-high-end prices are peaking and have become more volatile. ASP of residential land in Greater Jakarta Low-mid-end prices still climbing.
New areas are being developed near Jakarta’s upcoming LRT and Alam Sutera Pasar Kemis Sentul City Sentul Nirwana BSD City Grand Wisata MRT stations. Kota Wisata Citra Raya Tangerang Summarecon Serpong Summarecon Bekasi These are mainly in the south and east, targeting low-mid-end (IDRm/sqm) buyers.
18
16
14
12 Mid-high
10
8
6
4 Low-mid
2 TAKEAWAY
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Prices of low-end properties less volatile than mid-high-end.
Source: BPS
THE DOOR TO ASEAN PROPERTY 98 LOW-END MASS HOUSING OPPORTUNITIES SELL MID-HIGH INDONESIA
Stock of apartment in Inner Jakarta There were 181,112 apartments in Inner Jakarta in 9M17. Supply could spike in 2018E as many projects were delayed for several years. We expect surge of new stock in the next two years. (Units) 250,000 25% Based on our channel checks, apartment rentals in Jakarta’s CBD 200,000 20% still yield the most vis-à-vis landed or shop houses.
150,000 15% Returns of property investments are converging with alternative 100,000 10% investments. This implies even less demand for new properties in Inner Jakarta. 50,000 5%
0 0% 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18F 1Q19F
Total Apartment supply YoY growth (RHS)
Source: Colliers, Maybank Kim Eng
Yield comparison of different asset classes
13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% TAKEAWAY 6.0% 5.0% 4.0% 3.0% Investing in physical properties is not 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 recommended, because of uncompetitive yields, CBD Apartment rental South Jakarta yield rental higher taxes & liquidity considerations. 10-yr AAA Corp bond 10-yr Govt bond 12-m Time Deposit Source: BPS
THE DOOR TO ASEAN PROPERTY 99 LOW-END MASS HOUSING OPPORTUNITIES SENSITIVE WHEN RATES RISE INDONESIA
When interest rates increase by 100bps, they could affect debt Debt Servicing Ratio servicing ratio by 4%, assuming minimum wage growth of 8% pa.
This would affect affordability as banks are stringent in following Low Low-Middle Middle Middle Upper a maximum debt servicing ratio of 30%.
Property price (IDRm) 650 1150 1600 3500
Mortgage rate 8% 8% 8% 8%
Debt service ratio 28% 28% 28% 28%
Mortgage rate 9% 9% 9% 9%
Debt service ratio 32% 33% 32% 36%
Source: BPS TAKEAWAY A rate increase of 100bps could delay purchases by at least one year, ceteris paribus.
THE DOOR TO ASEAN PROPERTY 100 LOW-END MASS HOUSING OPPORTUNITIES INVESTMENT OPPORTUNITIES INDONESIA
Ciputra Development (CTRA IJ) is our top BUY for its high CTRA P/BV (1-year forward) exposure to low-mid-end housing in Greater Jakarta. It is developing four townships in the city. 5.0
4.0 Unlike the typical Indonesian developer which buys and holds land for liquidating at fat margins at a suitable time, it moves 3.0 SD +2 volume rapidly for lower-end homes of below IDR600m. These 2.0 SD +1 are in high demand. 1.0 Mean SD -1 Our calculations showed that CTRA’s high asset turnover should 0.0 SD -2 2013 2014 2015 2016 2017 2018 generate higher returns than peers.
PBV Mean SD - 1 SD + 1 SD - 2 SD + 2
Source: Euromonitor, Maybank Kim Eng
Valuation matrix
Upside Implied Disc. RNAV/ share Price TP P/BV ROE Div yield to TP to RNAV Company Ticker Rating TAKEAWAY (local) (local) (local) (%) (%) FY18F FY18F FY18F Alam Sutera Realty ASRI IJ Sell 1,131 390 300 -23% 66% 0.9 14% 2.3% With foreign-ownership restrictions in low-end Bumi Serpong Damai BSDE IJ Hold 3,618 1,760 2,000 5% 51% 1.3 12% 1.1% housing, we advise exposure through CTRA IJ. Ciputra Development CTRA IJ Buy 2,902 1,145 1,600 40% 61% 1.4 9% 0.3%
Lippo Karawaci LPKR IJ Buy 2,218 480 680 42% 78% 0.5 2% 1.5%
Pakuwon Jati PWON IJ Hold 1,335 620 670 8% 54% 2.5 16% 0.8%
Sentul City BKSL IJ Sell 936 200 100 -50% 79% 1.2 6% 0.0%
Summarecon Agung SMRA IJ Hold 2,928 925 900 -3% 68% 1.9 7% 0.6%
Average (ex-BKSL) 63% 1.4 10% 1%
Source: Bloomberg, Maybank Kim Eng (Prices as of 20 March 2018)
THE DOOR TO ASEAN PROPERTY 101 RISING DEMAND FOR INDUSTRIAL LAND E-COMMERCE IS A KEY DRIVER INDONESIA
Manufacturing capacity utilisation Utilisation of production facilities is near all-time high.
(%) Manufacturing production capacity Indonesia’s direct investments continue to climb, especially with 85 the rise of e-commerce. 80 75 Warehouses and distribution centres required by e-commerce provide another source of demand for industrial land. 70 65 60 55 50 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17
Source: Bank Indonesia
FDI & DDI in Secondary and Tertiary sectors
(USDm) 35,000 30,000 25,000 20,000 TAKEAWAY 15,000 10,000 5,000 Rising industrial-land demand from existing 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 industries & e-commerce.
Secondary Sector Tertiary Sector
Source: BKPM
THE DOOR TO ASEAN PROPERTY 102 RISING DEMAND FOR INDUSTRIAL LAND INVEST IN LISTED INDUSTRIAL - ESTATE DEVELOPERS INDONESIA
Developers expect minimal risks from upcoming elections in Bekasi Fajar financials 2018-2019.
(IDR b) 1,321 1,400 1,217 1,224 Supply of industrial land is tight. There are very few developers with large industrial land banks. 1,200 1,006 1,000 840 824 710 745 800 687 599 695 Our top pick is Bekasi Fajar Industrial Estate (BEST IJ). It is one 561 472 520 528 of the very few to own a sizeable land bank, sufficient for more 600 396 483 515 391 336 than 10 years of development. 400 212 200 With its estates’ superior locations, BEST also has pricing power. - 2014 2015 2016 2017 2018F 2019F 2020F Revenue EBIT Net Profit
Source: Company data, Maybank Kim Eng
BEST P/BV band (1-year forward)
(x) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 TAKEAWAY 0.5 0.0 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 BEST IJ is pure industrial-estate developer with a PBV Mean SD - 1 SD + 1 SD - 2 SD + 2 land bank to cater to demand.
Source: Bloomberg, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 103 SOFT CAP RATES FOR COMMERCIAL SUPPLY HITS CAP RATES INDONESIA
Office oversupply in Jakarta. Strong influx of new supply while Stock of office supply demand has been weakening from the commodity price plunge in 2014-2016. (million sqm) (%) 8.0 14% 7.0 12% Many foreign energy companies downsized their operations in 6.0 10% Indonesia. Sub-6% GDP growth since 2012 also slowed down 5.0 demand for office space. 8% 4.0 6% 3.0 Around 250k sqm of existing stock remains unsold today. We are 2.0 4% expecting 15% additional supply or about 1m sqm by 2020E. 1.0 2% 0.0 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F
Stock of Office space YoY growth (RHS)
Source: Colliers
Occupancy rates and cap rate
100% 16% 14% 80% 12%
60% 10% 8% TAKEAWAY 40% 6% 4% 20% Oversupply will likely persist from high additional 2% supply in next three years. 0% 0% 2010 2011 2012 2013 2014 2015 2016 2017
Occupancy rates Cap rate (RHS) Cost of Capital (RHS)
Source: Colliers
THE DOOR TO ASEAN PROPERTY 104 SOFT CAP RATES FOR COMMERCIAL MORATORIUM 0N RETAIL SPACE SUPPORTING CAP RATES INDONESIA
Jakarta’s retail market is reeling from weak discretionary Stock of retail supply spending & e-commerce.
(million sqm) (%) In 2017, many department stores and major retailers closed 5.0 5% shop. Few foreign retailers were also looking to expand into 4.0 4% Indonesia.
3.0 3% Occupancy in Jakarta’s malls has fallen to its lowest level in 10 2.0 2% years. Rental rates have been flat in past three years.
1.0 1% Moratorium by Jakarta Government on new retail space is 0.0 0% indefinite. 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F
Stock of Retail space YoY growth (RHS)
Source: Colliers
Occupancy rates and cap rate
100% 30%
95% 25% 20% 90% 15% TAKEAWAY 85% 10%
80% 5% Weak retail sales have forced several major stores
75% 0% to close. Demand for expansion is weak. Avoid 2010 2011 2012 2013 2014 2015 2016 2017 office. Occupancy rates Cap rate (RHS) Cost of Capital (RHS)
Source: Colliers
THE DOOR TO ASEAN PROPERTY 105 FOREIGN OWNERSHIP RESTRICTIONS INDONESIA
Real estate asset class and considerations
Regulations are complex and restrictive. There are many types of Foreigners need Indonesian residential permits to own properties in Indonesia. property related titles. Foreigners typically use “right-to-build”, “right-to-use” and “right-to-rent”. They are restricted from “right-to-own”. Foreigners may buy properties with leasehold titles. Also, prohibited from buying low and middle segment properties.
The lack of foreign participation is partly responsible for sluggish Titles are for 30 years, extendable by another 50 years. high-end property prices in Jakarta.
There is a price floor for foreigners for residential properties. This floor reflects the prices of luxury properties.
Foreigners must buy from primary market only.
Foreigners can apply for mortgages with maximum credit of IDR15b and tenures of 10 years.
Foreigners cannot buy commercial properties. Must be acquired by Indonesian incorporated companies. TAKEAWAY With limited foreign interest and supply exceeding demand for luxury property, softness in prices persists.
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THE DOOR TO ASEAN PROPERTY 108 MALAYSIA Wong Chew Hann (603) 2297 8686 [email protected], Wong Wei Sum (603) 2297 8679 [email protected], Kevin Wong (603) 2082 6824 [email protected] THE DOOR TO ASEAN PROPERTY
BUYERS’ MARKET?
The overall property sector remains in an oversupply situation and we believe the supply-demand imbalances will extend beyond 2020. Investors looking to invest in physical property can afford to be selective.
SILVER LINING, DIVERSIFICATION
That said, there is a silver lining in the industrial property segment, thanks to relatively higher barriers to entry. Some property developers are also diversifying overseas or into other business(es) including hospitality - Sunway being a case in point.
REITS AS AN ALTERNATIVE
REITs offer an attractive investment alternative due to widening of yield spreads against the government bond yield. Our preferred pick is IGB REIT due to its malls’ prominent location which can sustain near- term earnings and DPU.
March 2018 109 BUYERS’ MARKET? SUPPLY-DEMAND IMBALANCES TO EXTEND BEYOND 2020 MALAYSIA
Unsold residential units - overall RESIDENTIAL: No. of unsold units (LHS) % YoY (RHS) Total residential unsold units hit an 11th year high averaging 110,000 60% 102,432 units in 1Q-3Q 2017 vs. the previous high of 105,681 100,000 50% units in 2006 (average 1Q-4Q 2006). 90,000 40% 30% 80,000 By location, almost 59% of the unsold units in 3Q 2017 were 20% in Johor (17.8%), Selangor (14.7%), Penang (14.2%), Kuala 70,000 10% Lumpur (11.9%). 60,000 0% 50,000 (10%) 40,000 (20%) 30,000 (30%) Sep-11 Mar-11 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
Source: NAPIC, CEIC, Maybank Kim Eng
Unsold residential units – by location
Kuala Lumpur Selangor Johor Pulau Pinang 35,000 TAKEAWAY 30,000 25,000 Unsold stock at all time high. 20,000 15,000 10,000 5,000 , 0 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
Source: NAPIC, CEIC, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 110 BUYERS’ MARKET? SUPPLY-DEMAND IMBALANCES TO EXTEND BEYOND 2020 MALAYSIA
Unsold residential units – by type RESIDENTIAL: 70,000 Low cost houses Low cost high-rise Landed properties High-rise 60,000 By type, almost 95% of the unsold units in 3Q 2017 comprised 50,000 landed properties (48.0%) & high-rise (46.8%), while low-cost 40,000 made up just 5.2%. 30,000 20,000 Unsold-to-existing stock ratio was highest in the high-rise 10,000 segment (at 5.7% in 3Q 2017), with unsold high-rise units seeing the fastest rise since 2015. 0
,
Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
Source: NAPIC, CEIC, Maybank Kim Eng
Unsold-to-existingold to e st g stock stoc ratio at o Low cost houses Low cost high-rise Landed properties High-rise
TAKEAWAY Sizeable MYR39b* worth of unsold residential units, which will take some time to clear.
, (* based on 97,004 unsold units and MYR404,835 average house price in 3Q 2017, both sourced from NAPIC) Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-03
Source: NAPIC, CEIC, Maybank Kim Eng
THE DOOR TO ASEAN PROPERTY 111 BUYERS’ MARKET? SUPPLY-DEMAND IMBALANCES TO EXTEND BEYOND 2020 MALAYSIA
Fig: Unsold residential units – by type
Source: BNM
Maximum Affordable House Prices, by Household Income
Household income % share of Maximum affordable house price (MYR) (MYR/month) households TAKEAWAY < 1,999 8.8 112,200 – 124,700 2,000 – 3,999 26.1 72.1% 222,150 – 247,200 THE DOOR TO ASEAN PROPERTY 112 BUYERS’ MARKET? SUPPLY-DEMAND IMBALANCES TO EXTEND BEYOND 2020 MALAYSIA Residential property stock – incoming supply RESIDENTIAL: 900,000 40 800,000 30 Positively, incoming supply has tapered down to 480,060 700,000 20 units in 3Q 2017 (-43% YoY). 600,000 10 500,000 0 400,000 (10) 300,000 (20) 200,000 (30) 100,000 (40) 0 (50) Jun-01 Jun-01 Jun-04 Jun-04 Jun-07 Jun-07 Jun-10 Jun-10 Jun-13 Jun-16 Jun-16 Mar-11 Sep-03 Sep-06 Sep-09 Sep-12 Sep-15 Mar-02 Mar-05 Mar-08 Mar-14 Mar-17 Dec-11 Dec-02 Dec-05 Dec-08 Dec-14 Residential Property Stock (RPS): Incoming Supply (IS) % YoY (RHS) Source: NAPIC, CEIC, Maybank Kim Eng Unsold-existing stock ratio TAKEAWAY The industry is adjusting to the oversupply, shifting to affordable housing segment. Source: www.housingwatch.my THE DOOR TO ASEAN PROPERTY 113 BUYERS’ MARKET? SUPPLY-DEMAND IMBALANCES TO EXTEND BEYOND 2020 MALAYSIA Office space – existing supply and occupancy rate OFFICE: 100 25,000,000 Kuala Lumpur office space occupancy rate retraced to 77.9% in 2016 from 81.8% in 2006 as supply growth (2006-16: 3.9% CAGR) outpaced demand (3.4% CAGR). At 77.9% in 2016, it was 95 4.4ppts below the national average of 82.3%. 20,000,000 BNM estimates 38m sq ft of incoming supply into the Klang 90 Valley. This 38m sq ft could add 24% to KL+Putrajaya+ Selangor office space supply (of 156.1m sq ft in 2016), based on MKE estimates. 85 15,000,000 BNM further estimates that this 38m sq ft of incoming supply could lift office vacancy rate in the Klang Valley to an all-time 80 high of 32% by 2021 – this would mean that 1-in-3 offices in the Klang Valley could be vacant in 2021. 10,000,000 75 70 5,000,000 65 TAKEAWAY 60 - 1-in-3 offices in the Klang Valley could 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 be vacant in 2021, as per BNM estimates. MY supply (sq m) (RHS) KL supply (sq m) (RHS) MY occupancy rate (%) (LHS) KL occupancy rate (%) (LHS) Source: NAPIC, CEIC, Maybank Kim Eng THE DOOR TO ASEAN PROPERTY 114 BUYERS’ MARKET? SUPPLY-DEMAND IMBALANCES TO EXTEND BEYOND 2020 MALAYSIA Retail space and occupancy rate RETAIL: 100 16,000,000 There was 15.2m sq m of shopping complex retail space 95 14,000,000 86.3 nationwide in 3Q 2017, of which 81.2% was occupied. 90 12,000,000 83.6 81.3 80.6 81.8 81.4 10,000,000 85 78.9 79.4 79.9 79.1 8,000,000 Nationwide supply would increase by 17.8%, including 80 77.7 81.2 76.1 6,000,000 under construction and if all planned retail space is 75 75.6 74.3 4,000,000 constructed. 70 2,000,000 67.4 65 - Total space (sq m) (RHS) Occupancy rate (%) (LHS) Source: NAPIC, CEIC, Maybank Kim Eng Unsold-existing stock ratio TAKEAWAY 3Q17 (‘000 sq m) Malaysia K Lumpur Selangor Penang Johor As per MKE estimates, KL and Johor retail Existing (1) 15,233 3,058 3,487 1,738 1,771 space would rise by 22% and 33% Incoming 1,916 228 354 44 518 respectively when all space under Sub-total (2) 17,149 3,286 3,841 1,782 2,289 construction currently is completed and if Planned 801 435 - - 62 Total (3) 17,950 3,721 3,841 1,782 2,351 all planned retail space is constructed. This could create significant oversupply. Inc (%) = (2) / (1) 12.6% 7.4% 10.2% 2.5% 29.3% Inc (%) = (3) / (1) 17.8% 21.7% 10.2% 2.5% 32.8% Note: “Incoming” comprises those under construction currently “Planned” comprises those where building plan approvals have been received but construction has yet to start Source: NAPIC , Maybank KE THE DOOR TO ASEAN PROPERTY 115 SILVER LINING, DIVERSIFICATION SILVER LINING IN THE INDUSTRIAL PROPERTY SEGMENT MALAYSIA Existing and future supply of industrial properties in Greater KL Industrial property supply is relatively stable compared to the other property segments due to high entry barriers – Type of State Existing Supply Future Supply sizable land bank, government support, good location - and Property we expect demand to pick up, driven by growing e- Incoming 2015 2016 1H2017 Planned Supply Supply commerce. KL TOTAL 5,138 5,138 5,138 0 37 Land owners like Sime Property and UEMS with sizeable Selangor TOTAL 36,294 38,857 39,139 1,389 1,372 landbank in strategic locations (near airports, future HSR Greater KL Grand Total 41,432 43,995 44,277 1,389 1,409 stations or JB-SG second link) and industrial REITs such as Axis REIT and Atrium REIT should benefit from the growing Growth Rate 6.19% 0.64% 3.1% 3.1% (%) demand for industrial properties. Source: NAPIC, Savills Malaysia Research Stable rental trend for industrial properties between 2015-2017 Asking monthly rents (RM per sq. ft.) No Areas 2015 2016 2017 1 Petaling Jaya - Sections 13, 19, 51 and 51A 1.80-2.20 1.80-2.30 1.90-2.50 2 Shah Alam - Sections 15, 16, 21-27 1.10-2.10 1.30-2.20 1.30-2.30 3 Shah Alam - Glenmarie, Temasya, Bukit Jelutong 1.70-2.20 1.80-2.30 1.80-2.40 4 Klang - Northport, Westport 0.90-1.40 1.00-1.50 1.00-1.70 TAKEAWAY 5 Kajang 0.80-1.00 0.80-1.10 0.80-1.20 6 Bangi 0.80-1.00 0.90-1.20 1.00-1.30 Industrial property segment is a silver lining. 7 Sungai Besi - Chan Sow Lin 1.80-2.40 1.90-2.50 1.90-2.60 8 Kepong 1.20-1.60 1.30-1.80 1.50-2.00 9 Rawang 0.60-1.20 0.80-1.30 1.00-1.50 Source: Savills Malaysia Research THE DOOR TO ASEAN PROPERTY 116 SILVER LINING, DIVERSIFICATION DEVELOPERS ARE MOVING BEYOND THEIR DOMESTIC MARKET MALAYSIA Sunway intends to list its healthcare unit by 2022 Sunway has reclassified its sector listing on the stock exchange from Properties to Trading/Services and intends Sunway: New medical centers in the pipeline to expand its other businesses given the challenging Construction property market outlook. New medical centre Location Total beds completion date SMC 3 Bandar Sunway 245 Completed in 2017 To reduce dependency on the domestic property market, Malaysian developers - SP Setia, Sunway and UEM Sunrise SMC Velocity Jalan Cochran, Kuala Lumpur 240 2019 - have been acquiring landbank in Australia and SMC Seberang Jaya Penang mainland 180 2020 Singapore. SMC Damansara Kota Damansara 250 2022 SMC Ipoh Perak 200 2023 Source: Company, Maybank Kim Eng Developers expanding overseas Sime Darby SP Setia UEM Sunrise Sunway Prop Battersea Battersea Power Station - - London Power Station Marque Residences, Aurora Central Melbourne, Wonderland Business Shangri-La Melbourne Conservatory Melbourne, - Australia Park Hotel, UNO Melbourne Mayfair Melbourne TAKEAWAY Anchorvale Lane, Daintree Residence - - Singapore Brookvale Park China: Sunway To diversify their income base, developers have Others: - Durban, South Africa Guanghao, Tianjin Eco city been expanding into other businesses and/or India: Sunway OPUS Grand India, Sunway overseas. MAK Signature Residence Internatio nal/GDV 16% 1.5% 6% (%) Source: Companies THE DOOR TO ASEAN PROPERTY 117 SILVER LINING, DIVERSIFICATION DEVELOPERS: SUNWAY IS OUR TOP PICK MALAYSIA PATAMI breakdown by businesses Sunway has a more diversified earnings base with a 54.4% stake in Sunway Construction (SCGB MK) and 37.3% in SunREIT (SREIT MK). Property Property Investment Slower property development contribution would be 35% 30% partially cushioned by rising earnings contribution from Hospitality and leisure the construction business and steady dividend income Construction from the REIT vehicle. 10% 20% Others (trading, building materials, Sunway intends to list its healthcare business by 2022. healthcare) Total beds are expected to grow to 1,488 (+140%) from 5% 618 beds now. We value Sunway at MYR2.02 TP, on an unchanged 0.75x Source: Company, Maybank Kim Eng P/RNAV. Property sales track record (MYR m) 1,600 1,400 1,200 1,000 TAKEAWAY 800 600 Sunway is more than just a developer. 400 200 0 2013 2014 2015 2016 2017 2018F Source: Company, Maybank Kim Eng THE DOOR TO ASEAN PROPERTY 118 REITS AS AN ALTERNATIVE WIDENING OF YIELD SPREAD MALAYSIA 1-year forward REITs DPU yield vs.10-year MGS yield Widening of yield spread (due to easing of share prices) in (%) 2018 YTD provides favourable entry points into M-REITs. 6.50 6.00 Yield spread is currently above 200bps - which is +1SD, 5.5 5.50 attractive, as the 3-year average was hovering around Mean, 5.3 130bps. 5.00 -1SD, 5.1 4.50 4.00 3.50 3.00 Jul-15 Jul-16 Jul-17 Jan-15 Jan-15 Jan-16 Jan-17 Jan-18 Average M-REIT yield 10-year MGS yield Note: Spread is based on average 1-year forward M-REITs net dividend yield (excluding 10% withholding tax) vs. 10-year MGS yield Source: Bloomberg, Maybank Kim Eng Yield spread between average REIT DPU yield and 10-year MGS yield (bps) 240 200 160 +1SD, 158 TAKEAWAY Mean, 133 120 -1SD, 109 80 Rising REIT yields and muted MGS bond yield 40 movements provide attractive investment entry Jul-15 Jul-16 Jul-17 Jan-15 Jan-15 Jan-16 Jan-17 Jan-18 into REITs. Yield spread Note: Spread is based on average 1-year forward M-REITs net dividend yield (excluding 10% withholding tax) vs.10-year MGS yield Source: Bloomberg, Maybank Kim Eng THE DOOR TO ASEAN PROPERTY 119 REITS AS AN ALTERNATIVE VARIOUS CHOICES OF M-REITS WITH DISTINCT PORTFOLIO, SPREAD & RISK MALAYSIA Yield comparison (10-year MGS yield vs. M-REITs [within MKE’s coverage] CY18 net yields) Retail-focused M-REITs (IGB REIT, CMMT, Pavilion REIT, Sunway REIT, Al-Salam) (%) DPU growth supported by rental reversions which are generally above office M-REITs 8 7.2 7.1 Our preferred pick is IGB REIT for its malls’ prime location 6.9 7 6.3 Office-focused M-REITs (KLCCP, MRCB-Quill) 5.9 5.9 6 Low DPU growth potential, but offset by lower occupancy 5.4 5.3 risks (from longer lease terms of tenants) 5 4.5 Our preferred pick is MRCB-Quill REIT for its higher DPU yield 3.9 4 Others 3 YTL REIT backed by steady, master leases of its M’sian hotels 2 Axis REIT for industrial asset exposure, but higher occupancy risk from its multi-tenanted offices 1 0 CMMT CMMT KLCCP KLCCP IGB REIT IGB REIT Al-Salam TAKEAWAY YTL REIT REIT YTL Axis REIT Axis REIT MRCB-Quill 10-year MGS Sunway REIT Sunway REIT Pavilion REIT REIT Pavilion Wider choices of REITs to choose from – which Note: M-REITs’ net DPU yields exclude 10% withholding tax mostly offer decent/attractive yield spread. Source: Bloomberg, Maybank Kim Eng THE DOOR TO ASEAN PROPERTY 120 REITS AS AN ALTERNATIVE SOME REITS ARE ALSO COMPLEMENTED BY DECENT DPU GROWTHS MALAYSIA DPU growth of M-REITs within MKE’s coverage (YoY %) CY16 CY17 CY18E CY19E CY20E KLCCP Stapled 2.7 (0.5) 1.9 3.2 5.3 Sunway REIT 2.6 3.7 4.8 3.5 n.a. IGB REIT 6.3 4.4 8.4 2.9 2.4 Pavilion REIT 0.5 0.0 (0.8) 8.4 2.7 CapitaLand M'sia (2.0) (4.1) (2.2) 0.2 1.9 Axis REIT (1.8) 0.1 8.5 12.8 2.3 YTL REIT 0.7 0.2 5.0 8.4 n.a. MRCB-Quill REIT 8.8 0.1 2.8 (4.8) 0.3 TAKEAWAY Al-Salam REIT n.a. 0.0 (1.3) 1.1 6.5 REITs with attractive yields are also backed by solid fundamentals which sustain stable DPUs. Source: Trust, Maybank Kim Eng THE DOOR TO ASEAN PROPERTY 121 REITS AS AN ALTERNATIVE IGB REIT: RESILIENT EARNINGS BACKED BY TWO PRIME MALLS MALAYSIA Occupancy of retail malls owned by M-REITs (within MKE coverage) IGB REIT Mid Valley Megamall and The Gardens Mall have 6 7 prominent locations – between Kuala Lumpur and Petaling 52% 98.0 98.0 98.0 96.0 97.0 Jaya, Selangor 6%'%0)'' 6 96.2 98.1 98.5 95.8 98.9 Strong traffic and footfall to sustain tenant sales and ! (") 6 - - 85.0 87.0 86.3 provide recurring demand for retail space at the malls )4"2(2&'' 6 - - 74.0 76.5 90.0 %!''"8 99.9 99.9 99.9 99.9 99.9 The malls are also at comfortable distances from other "#('' prime malls – i.e. KLCC, Pavilion $"2!")3'' 98.8 97.6 98.0 99.7 98.0 5)7882(%! 5) 96.8 97.8 98.4 97.8 97.9 $011%)#'' 5)782)%6' 5) 99.8 90.8 96.1 96.0 97.3 $011%)#'' 5)78Putra 5) 69.8 - 82.4 84.6 86.0 Mall 52)"8'9 98.1 97.3 98.3 99.1 99.4 $"%)"3 100.0 98.5 96.3 98.0 94.4 #)#'9 98.0 95.4 90.4 91.0 90.1 34034'' 100.0 99.5 99.7 98.4 98.9 201% )%48 - - 91.5 92.5 92.6 TAKEAWAY '' KOMTAR KBCC ALSREIT - - 89.0 93.0 95.0 Mall IGB REIT is our top retail REIT pick due to its malls’ prime locations. Source: Trusts, Maybank Kim Eng THE DOOR TO ASEAN PROPERTY 122 REITS AS AN ALTERNATIVE PROMINENT LOCATION OF IGB REIT’S MALLS – AWAY FROM KEY MALAYSIA COMPETITORS Suria KLCC (6km) Pavilion KL (6km) 1Utama Shopping Centre (8km) MidValley Megamall and The Gardens Mall Sunway Pyramid (9km) Pavilion 2 (completion 2019; 7km) Source: Google Maps, Maybank Kim Eng THE DOOR TO ASEAN PROPERTY 123 REITS AS AN ALTERNATIVE IGB REIT: DPU GROWTH TO BE SUSTAINED MALAYSIA Our forward DPU growth forecasts are conservative. Net DPU – steadily growing since IPO IGBR REIT’s earnings and DPU could surprise on the upside if tenant sales growth remains favourable. (sen) (%) Variable rent/turnover rent constitutes 12-13% of IGB REIT’s 10 12.0 9.3 total rental income p.a. 10.7 9.1 8.9 9 8.2 7.8 10.0 8 7.4 7.0 7 6.3 8.0 6 8.4 5 6.0 6.3 4 5.1 4.0 3 4.4 2 2.9 2.0 2.4 1 TAKEAWAY 0 0.0 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E Solid fundamentals are expected to be translated Net DPU (LHS) YoY % (RHS) into DPU growth. Note: Net DPUs exclude 10% withholding tax Source: Trust, Maybank Kim Eng THE DOOR TO ASEAN PROPERTY 124 FOREIGN OWNERSHIP RESTRICTIONS MALAYSIA Real estate asset class and considerations Minimum Investment Select from a range of properties, as long as it is priced above MYR1m in Peninsular Malaysia (and min price cap of MYR2m for foreigners) and MYR350,000 in Sabah/Sarawak. Both residential and commercial properties can be purchased under a foreigner's name, or under a company. Consent Foreigners are required to obtain the State Authority's consent before gaining full ownership/ transfer of the property, which takes between 6 weeks and 6 months, depending on the state. Financing Malaysian banks and foreign banks in Malaysia provide loans to foreigners. They will typically finance up to 70% or 80% of the property price. This is quite a bargain compared to other countries. Generally, Malaysian banks will only give loans to foreigners who are working in Malaysia and have a valid work permit. However, there are some local and foreign banks who would be willing to lend to non-resident foreigners or who have retired in Malaysia under the MM2H programme. TAKEAWAY It is usually easiest to get financing for new development as the developers will have Foreigners friendly policy with minimal arranged with selected banks to offer loans to purchasers, including foreigners. restrictions. Properties that Malay Reserve Land, low-and medium-cost properties as determined by the State Authority, foreigners cannot properties allocated to Bumiputera (Malay quota) as determined by the State Authority, land own which is deemed agricultural land unless it is over 5 acres and is being used for commercial purposes. THE DOOR TO ASEAN PROPERTY 125 THE DOOR TO ASEAN PROPERTY 126 APPENDIX PERFORMANCE & VALUATION TABLE Mkt Cap 3mth ADTV TP PE (x) PB (x) DY (%) EV/EBITDA (x) RoE (%) Name Ticker (USDm) (USDm) Price Rating (lcl crcy) FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E Indonesia Alam Sutera Realty ASRI IJ 557 1.0 390 Sell 300 9.3 10.2 0.8 0.8 1.6 1.5 5.3 5.7 9.3 7.9 Bekasi Fajar BEST IJ 202 0.7 288 Buy 400 5.3 5.4 0.7 0.6 3.5 3.8 5.1 5.1 13.0 11.5 Bumi Serpong Damai BSDE IJ 2,463 2.6 1,760 Hold 2,000 11.3 10.5 1.2 1.1 1.5 0.9 2.4 2.6 11.3 11.0 Ciputra Development CTRA IJ 1,545 1.7 1,145 Buy 1,600 16.5 15.1 1.4 1.3 0.0 0.0 2.5 2.6 8.8 8.8 Lippo Cikarang LPCK IJ 164 0.3 3,230 Buy 6,800 8.0 5.5 0.5 0.4 0.0 0.0 1.6 na 8.0 10.0 Lippo Karawaci LPKR IJ 806 1.0 480 Buy 680 15.3 9.2 0.5 0.5 1.6 1.0 6.3 5.0 3.6 5.8 Pakuwon Jati PWON IJ 2,171 1.0 620 Hold 670 17.3 16.6 2.5 2.2 0.9 0.9 2.1 1.9 15.6 14.4 Sentul City BKSL IJ 804 5.4 200 Sell 100 25.5 38.1 1.2 1.1 0.0 0.0 2.4 2.7 4.7 3.0 Summarecon Agung SMRA IJ 970 1.7 925 Hold 900 26.8 23.0 1.9 1.8 0.5 0.8 2.4 2.0 7.4 8.1 Malaysia Al-Salam REIT SALAM MK 133 0.0 0.9 Hold 1.0 14.4 14.3 0.8 0.8 5.9 6.0 15.9 16.1 5.8 5.9 Axis REIT AXRB MK 394 0.2 1.3 Hold 1.5 13.9 12.4 1.0 1.0 6.5 7.3 16.4 15.2 6.9 7.8 CapitaLand (M) Mall Trust CMMT MK 532 0.6 1.0 Buy 1.2 13.6 13.6 0.8 0.8 7.0 7.0 15.5 15.6 5.7 5.8 Eco World Development ECW MK 782 0.4 1.0 Buy 1.7 18.0 9.4 0.7 0.6 0.0 1.1 9.1 7.0 3.9 7.1 Eco World International ECWI MK 619 0.2 1.0 Hold 1.1 14.0 6.3 0.9 0.8 0.0 4.0 na na 6.6 13.5 Glomac GLMC MK 94 0.0 0.5 Hold 0.6 12.0 8.0 0.3 0.3 1.7 2.5 8.6 8.2 na na IGB REIT IGBREIT MK 1,349 0.9 1.5 Buy 1.9 17.1 16.6 1.4 1.4 5.9 6.1 17.9 17.5 8.2 8.5 KLCCP Stapled Group KLCCSS MK 3,275 0.9 7.1 Hold 8.0 17.5 17.0 0.9 0.9 4.8 4.9 14.6 13.6 5.5 5.4 Mah Sing Group MSGB MK 651 0.8 1.1 Hold 1.3 8.0 8.0 0.8 0.8 5.0 5.0 2.3 2.1 na na MRCB-Quill REIT MQREIT MK 281 0.1 1.0 Buy 1.4 12.1 11.9 0.8 0.8 7.5 7.2 14.7 14.5 6.6 6.8 Pavilion REIT PREIT MK 1,093 0.2 1.4 Hold 1.6 18.5 17.0 1.1 1.0 5.2 5.7 18.1 17.2 6.0 6.2 Sime Darby Property SDPR MK 2,467 2.4 1.4 Hold 1.6 11.5 13.8 1.0 1.0 3.5 2.9 10.7 12.9 10.5 7.1 SP Setia SPSB MK 3,042 3.2 3.2 Buy 3.8 23.7 13.3 1.1 1.8 2.3 4.4 22.6 20.2 na na Sunway SWB MK 1,871 1.6 1.5 Buy 2.0 12.0 11.1 0.9 0.8 3.7 4.0 12.7 12.0 na na Sunway REIT SREIT MK 1,219 0.8 1.6 Buy 1.9 16.4 16.0 1.1 1.1 5.5 5.6 19.0 18.2 6.9 7.2 Tambun Indah Land TILB MK 91 0.1 0.8 Hold 0.9 6.6 6.4 0.6 0.6 6.1 6.2 5.0 4.5 na na UEM Sunrise UEMS MK 1,159 0.9 1.0 Hold 1.3 20.4 16.3 0.6 0.6 1.0 1.1 18.6 18.9 na na Yong Tai Bhd YTB MK 183 0.7 1.5 Buy 1.8 18.0 6.0 1.2 1.0 0.0 0.0 14.7 4.8 11.1 25.7 YTL Hospitality REIT YTLREIT MK 475 0.3 1.1 Buy 1.4 14.0 12.5 0.7 0.8 6.5 7.3 16.3 14.6 1.8 1.9 Share prices as at 22 Mar, 2018 closing. Source: Maybank Kim Eng, Bloomberg March 2018 THE DOOR TO ASEAN PROPERTY 127 APPENDIX PERFORMANCE & VALUATION TABLE Mkt Cap 3mth ADTV TP PE (x) PB (x) DY (%) EV/EBITDA (x) RoE (%) Name Ticker (USDm) (USDm) Price Rating (lcl crcy) FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E FY18E FY19E Singapore Ascendas REIT AREIT SP 5,881 19.7 2.7 Buy 3.1 15.9 15.4 1.1 1.1 6.2 6.5 18.3 17.7 7.5 7.2 Bukit Sembawang BS SP 1,218 1.4 6.2 Buy 8.6 48.2 10.1 1.3 1.2 5.3 5.3 38.6 8.7 3.0 12.6 CapitaLand CAPL SP 11,697 28.5 3.6 Buy 4.1 11.8 14.8 0.8 0.8 3.6 3.8 18.7 16.2 7.8 5.9 City Developments CIT SP 9,114 17.6 13.2 Buy 14.2 19.0 17.6 1.2 1.2 1.4 1.4 13.7 13.0 7.1 7.3 GuocoLand GUOL SP 1,933 1.1 2.2 Buy 3.0 7.1 9.8 0.6 0.6 3.3 3.7 22.7 15.9 9.2 7.2 Ho Bee Land HOBEE SP 1,305 0.3 2.6 Buy 3.2 14.4 12.3 0.5 0.5 3.1 3.1 19.0 15.6 3.8 4.3 Mapletree Comm. Trust MCT SP 3,458 7.4 1.6 Sell 1.5 10.6 15.5 1.1 1.1 5.6 5.7 22.6 22.2 10.6 7.1 Mapletree Ind. Trust MINT SP 2,922 8.3 2.0 Buy 2.2 17.5 15.7 1.4 1.4 5.8 6.5 21.6 20.3 8.1 8.7 UOL Group Ltd UOL SP 5,541 10.5 8.7 Buy 10.4 18.3 15.7 0.8 0.7 2.0 2.0 12.0 11.8 4.2 4.7 Thailand Amata Corp AMATA TB 737 15.4 21.6 Buy 18.8 12.2 12.0 1.7 1.5 3.3 3.3 13.5 12.6 14.4 13.3 AP (Thailand) AP TB 850 2.9 8.5 Buy 9.4 6.9 6.4 1.1 1.0 5.1 5.4 10.7 10.2 16.7 16.0 Central Pattana CPN TB 11,295 15.1 78.8 Hold 74.8 29.7 24.5 5.2 4.6 1.6 1.9 18.9 16.0 18.4 20.1 L.P.N. Development LPN TB 500 3.1 10.6 Sell 9.2 11.1 9.1 1.2 1.1 5.9 7.2 11.3 8.9 11.1 12.9 Land & Houses LH TB 4,048 15.6 10.6 Buy 12.6 13.7 12.9 2.5 2.4 6.2 6.6 18.7 17.6 18.2 18.9 Pruksa Holding PSH TB 1,525 2.1 21.8 Buy 28.0 7.1 6.0 1.2 1.1 11.2 13.4 7.1 6.7 17.2 19.4 Quality Houses QH TB 1,014 6.6 3.0 Buy 3.7 9.6 9.4 1.2 1.2 6.3 6.4 20.6 20.4 13.1 12.7 Supalai PCL SPALI TB 1,312 4.9 22.1 Buy 26.8 7.0 7.1 1.4 1.2 6.2 5.5 7.1 7.1 19.7 18.4 WHA Corporation WHA TB 1,831 16.2 4.0 Buy 4.1 16.9 16.1 2.3 2.2 5.0 5.1 21.3 21.8 13.4 13.9 Vietnam Kinh Bac City KBC VN 277 2.2 13,450 Hold 13,100 14.1 12.1 0.7 0.7 0.0 0.0 14.7 13.2 5.3 5.8 Nam Long Inv't NLG VN 288 0.6 34,800 Buy 35,020 10.5 8.4 1.7 1.4 1.3 1.3 4.3 3.7 18.3 19.9 Novaland Inv't NVL VN 2,367 7.8 82,600 Hold 57,000 14.6 19.8 3.7 3.1 0.0 0.0 11.6 14.0 27.5 16.9 Vingroup JSC VIC VN 12,508 10.4 108,000 Buy 92,000 21.5 19.9 6.1 4.7 0.0 0.0 13.5 11.8 32.2 26.0 Share prices as at 22 Mar, 2018 closing. Source: Maybank Kim Eng, Bloomberg March 2018 THE DOOR TO ASEAN PROPERTY 128 APPENDIX ASEAN FORECAST TABLES Policy Rate Year-end (%) FX Forecast 2015 2016 2017 2018F 2019F Spot End Q1-18 End Q2-18 End Q3-18 End Q4-18 Indonesia 6.25 4.75 4.25 4.50 5.00 USD/JPY 105.70 108.00 107.00 106.00 105.00 Malaysia 3.25 3.00 3.00 3.25 3.50 EUR/USD 1.24 1.24 1.25 1.28 1.30 Philippines 4.00 3.00* 3.00 3.50 3.75 GBP/USD 1.42 1.42 1.44 1.48 1.48 Singapore 1.19 0.97 1.50 1.55 1.75 AUD/USD 0.78 0.79 0.80 0.81 0.83 Thailand 1.50 1.50 1.50 1.75 2.00 NZD/USD 0.72 0.71 0.74 0.75 0.76 Vietnam 4.50 4.50 4.25 4.25 4.25 USD/CHF 0.95 0.96 0.96 0.95 0.95 EUR/AUD 1.60 1.58 1.56 1.58 1.57 Fed Fund Rates - Upper Bound 0.50 0.75 1.50 2.25 3.00 EUR/JPY 130.86 133.92 133.75 135.68 136.50 Bond Yield Forecast AUD/NZD 1.07 1.11 1.08 1.08 1.09 US 10Y bond yield (%) 2.27 2.44 2.41 3.00 3.25 AUD/JPY 81.92 84.78 85.60 85.86 87.15 March 2018 THE DOOR TO ASEAN PROPERTY 129 APPENDIX ASEAN FORECAST TABLES ASEAN-6 Key Macroeconomic Indicators GDP Growth (%) Headline Inflation (%, average) Policy Rate (%, year-end) 2015 2016 2017 2018F 2019F 2015 2016 2017 2018F 2019F 2015 2016 2017 2018F 2019F Indonesia 4.9 5.0 5.1 5.3 5.5 6.4 3.5 3.8 3.8 3.6 6.25 4.75 4.25 4.50 5.00 Malaysia 5.0 4.2 5.9 5.3 5.1 2.1 2.1 3.8 2.8 2.8 3.25 3.00 3.00 3.25 3.50 Philippines 6.1 6.9 6.7 7 6.8 1.4 1.8 3.2 3.6 3.4 4.00 3.00 3.00 3.50 3.75 Singapore 1.9 2.0 3.6 2.8 2.5 -0.5 -0.5 0.6 0.9 1.5 1.19 0.97 1.5 1.55 1.75 Thailand 2.9 3.2 3.9 4.1 3.5 -0.9 0.2 0.7 1.3 1.9 1.50 1.50 1.50 1.75 2.00 Vietnam 6.7 6.2 6.8 6.5 6.5 0.6 2.7 3.5 4.0 4.0 4.50 4.50 4.25 4.25 4.25 Indonesia: Key Macroeconomic Indicators 2014 2015 2016 2017 2018E 2019E Real GDP (%) 5.0 4.9 5.0 5.1 5.3 5.5 Private Consumption (%) 5.1 5.0 5.0 4.9 5.1 5.2 Government Consumption (%) 1.2 5.3 (0.1) 2.1 7.6 0.1 Gross Fixed Capital Formation (%) 4.4 5.0 4.5 6.2 7.2 7.6 Exports of Goods & Services (%) 1.1 (2.1) (1.6) 9.1 4.4 6.2 Imports of Goods & Services (%) 2.1 (6.2) (2.4) 8.1 6.1 7.7 Current Account Balance (% of GDP) (3.1) (2.0) (1.8) (1.5) (2.2) (2.3) Fiscal Balance (% of GDP) (2.2) (2.8) (2.5) (2.4) (2.5) (2.5) Inflation Rate, in avg (%) 6.4 6.4 3.5 3.8 3.5 3.4 Unemployment Rate (%) 5.9 6.2 5.6 5.5 5.3 5.1 Exchange Rate (per USD, end-period) 12,440 13,795 13,436 13,548 12,800 12,750 Benchmark Interest Rate (% p.a., end of period) 5.86 6.25 4.75 4.25 4.50 5.00 March 2018 THE DOOR TO ASEAN PROPERTY 130 APPENDIX ASEAN FORECAST TABLES Malaysia: Key Macroeconomic Indicators 2014 2015 2016 2017 2018E 2019E Real GDP (%) 6.0 5.0 4.2 5.9 5.3 5.1 Private Consumption (%) 7.0 6.0 6.0 7.0 6.5 6.0 Government Consumption (%) 4.4 4.4 0.9 5.4 5.8 5.6 Gross Fixed Capital Formation (%) 4.8 3.6 2.7 6.2 6.6 6.4 Exports of Goods & Services (%) 5.0 0.3 1.1 9.6 4.9 4.0 Imports of Goods & Services (%) 4.0 0.8 1.1 11.0 5.7 5.2 Current Account Balance (% of GDP) 4.4 3.0 2.4 3.0 3.0 2.4 Fiscal Balance (% of GDP) (3.4) (3.2) (3.1) (3.0) (2.8) (2.6) Inflation Rate (%) 3.1 2.1 2.1 3.8 2.8 2.3 Unemployment Rate (%) 2.9 3.2 3.5 3.4 3.3 3.3 Exchange Rate (per USD, end-period) 3.50 4.29 4.49 4.05 3.65 3.60 Benchmark Interest Rate (% p.a.) 3.25 3.25 3.00 3.00 3.25 3.50 Philippines: Key Macroeconomic Indicators 2014 2015 2016 2017 2018E 2019E Real GDP (%) 6.1 6.1 6.9 6.7 7.0 6.8 Private Consumption (%) 5.6 6.3 7.0 5.8 5.4 5.5 Government Consumption (%) 3.3 7.6 8.4 7.3 5.7 5.4 Gross Fixed Capital Formation (%) 7.2 16.9 25.2 10.3 10.4 10.4 Exports of Goods & Services (%) 12.6 8.5 10.7 19.2 11.3 9.7 Imports of Goods & Services (%) 9.9 14.6 18.5 17.6 11.2 9.8 Current Account Balance (% of GDP) 3.8 2.5 (0.0) (0.3) (0.5) (0.5) Fiscal Balance (% of GDP) (0.6) (0.9) (2.4) (2.8) (3.0) (3.0) Inflation Rate (%) 4.1 1.4 1.8 3.2 4.3 3.4 Unemployment Rate (%) 6.8 6.3 5.5 5.0 5.0 5.0 Exchange Rate (per USD, end-period) 44.6 47.2 49.8 49.9 50.0 50.0 Benchmark Interest Rate (% p.a., end of period) 4.00 4.00 3.00 3.00 3.50 3.75 March 2018 THE DOOR TO ASEAN PROPERTY 131 APPENDIX ASEAN FORECAST TABLES Singapore: Key Macroeconomic Indicators 2014 2015 2016 2017 2018E 2019E Real GDP (%) 3.9 2.2 2.4 3.6 2.8 2.5 Manufacturing (%) 2.7 -5.1 3.7 10.1 3.0 2.1 Construction (%) 7.6 5.8 1.9 -8.4 1.6 2.5 Services (%) 4.3 3.5 1.4 2.8 2.8 2.6 Wholesale & Retail Trade (%) 3.0 3.6 1.0 2.3 2.2 2.4 Finance & Insurance (%) 9.3 5.3 1.6 4.8 4.7 4.2 Business Services (%) 2.0 5.4 -0.3 0.6 2.6 2.0 Current Account Balance (% of GDP) 19.7 18.1 19.1 18.8 19.2 19.5 Fiscal Balance (% of GDP) 0.1 -1.0 1.4 2.1 0.6 0.7 Inflation Rate (%, average) 1.0 -0.5 -0.5 0.6 0.9 1.5 Unemployment Rate (%) 1.9 1.9 2.2 2.1 2.1 2.0 Exchange Rate (per USD, end-period) 1.33 1.42 1.45 1.34 1.24 1.20 3M SIBOR (% p.a., end-period) 0.46 1.19 0.97 1.50 1.55 1.75 Thailand: Key Macroeconomic Indicators 2014 2015 2016 2017 2018E 2019E Real GDP (%) 1.0 3.0 3.3 3.9 4.1 3.7 Private Consumption (%) 0.8 2.3 3.0 3.2 3.6 3.6 Government Consumption (%) 2.8 2.5 2.2 0.5 2.6 3.0 Gross Fixed Capital Formation (%) (2.2) 4.3 2.8 0.9 3.8 4.1 Exports of Goods & Services (%) 0.3 1.6 2.8 5.5 4.4 3.0 Imports of Goods & Services (%) (5.3) 0.0 (1.0) 6.8 3.7 2.8 Current Account Balance (% of GDP) 3.8 8.1 11.7 10.8 11.0 10.5 Fiscal Balance (% of GDP) (2.9) (2.9) (2.8) (3.6) (3.0) (2.8) Inflation Rate (%) 1.9 (0.9) 0.2 0.7 1.3 1.9 Unemployment Rate (%) 0.8 0.9 1.0 1.2 1.0 0.9 Exchange Rate (per USD, end-period) 32.91 36.03 35.84 32.57 32.00 32.00 Benchmark Interest Rate (% p.a., end of period) 2.00 1.50 1.50 1.50 1.75 2.00 March 2018 THE DOOR TO ASEAN PROPERTY 132 RESEARCH OFFICES REGIONAL FX Adrian WONG MALAYSIA (603) 2297 8675 [email protected] Sadiq CURRIMBHOY Saktiandi SUPAAT WONG Chew Hann, CA Head of Research • Constructions • Healthcare Regional Head, Research & Economics Head, FX Research (603) 2297 8686 [email protected] Jade TAM (65) 6231 5836 (65) 6320 1379 • Strategy (603) 2297 8687 [email protected] [email protected] [email protected] Desmond CH’NG, ACA • Media • Building Materials WONG Chew Hann, CA Christopher WONG (603) 2297 8680 Mohd Hafiz Hassan Regional Head of Institutional Research (65) 6320 1347 [email protected] (603) 2082 6819 [email protected] (603) 2297 8686 [email protected] • Banking & Finance • Small & Mid Caps [email protected] Leslie TANG LIAW Thong Jung TEE Sze Chiah Head of Retail Research ONG Seng Yeow (65) 6320 1378 (603) 2297 8688 [email protected] (603) 2082 6858 [email protected] Regional Head of Retail Research [email protected] • Oil & Gas Services- Regional Nik Ihsan Raja Abdullah, MSTA, CFTe (65) 6231 5839 Fiona LIM ONG Chee Ting, CA (603) 2297 8694 [email protected] (65) 6320 1374 (603) 2297 8678 [email protected] [email protected] TAN Sin Mui [email protected] • Plantations - Regional Director of Research Mohshin AZIZ (65) 6231 5849 STRATEGY (603) 2297 8692 [email protected] SINGAPORE [email protected] Sadiq CURRIMBHOY • Aviation - Regional • Petrochem Neel SINHA Head of Research (65) 6231 5838 [email protected] Global Strategist YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Strategy ECONOMICS (65) 6231 5836 • SMID Caps – Regional [email protected] • Gaming – Regional • Media Suhaimi ILIAS CHUA Su Tye Willie CHAN TAN Chi Wei, CFA Chief Economist (65) 6231 5842 [email protected] Hong Kong / Regional (603) 2297 8690 [email protected] Malaysia | Philippines | China • REITs (852) 2268 0631 • Power • Telcos Derrick HENG, CFA (603) 2297 8682 [email protected] WONG Wei Sum, CFA (65) 6231 5843 [email protected] [email protected] (603) 2297 8679 [email protected] • Property • REITs (Office) CHUA Hak Bin • Property Luis HILADO Regional Thematic Macroeconomist FIXED INCOME LEE Yen Ling (65) 6231 5848 [email protected] (65) 6231 5830 Winson Phoon, ACA (603) 2297 8691 [email protected] • Telcos [email protected] John CHEONG, CFA (65) 6231 5831 • Building Materials • Glove • Ports • Shipping LEE Ju Ye (65) 6231 5845 [email protected] [email protected] Ivan YAP Singapore • Small & Mid Caps • Healthcare • Transport Se Tho Mun Yi (603) 2297 8612 [email protected] (65) 6231 5844 NG Li Hiang (603) 2074 7606 • Automotive • Semiconductor • Technology [email protected] (65) 6231 5840 [email protected] [email protected] Kevin WONG • Banks Dr Zamros DZULKAFLI (603) 2082 6824 [email protected] LAI Gene Lih (603) 2082 6818 • REITs • Consumer Discretionary (65) 6231 5832 [email protected] [email protected] LIEW Wei Han • Technology Ramesh LANKANATHAN (603) 2297 8676 [email protected] (603) 2297 8685 • Consumer Staples [email protected] THE DOOR TO ASEAN PROPERTY 133 RESEARCH OFFICES HONG KONG / CHINA INDONESIA Tanawat RUENBANTERNG VIETNAM Christopher WONG Isnaputra ISKANDAR Head of Research (66) 2658 6300 ext 1394 LE Hong Lien, ACCA (852) 2268 0652 [email protected] (62) 21 8066 8680 [email protected] Head of Institutional Research • HK & China Properties [email protected] • Banks & Diversified Financials (84 28) 44 555 888 x 8181 Jacqueline KO, CFA • Strategy • Metals & Mining • Cement Ornmongkol TANTITANATORN [email protected] (852) 2268 0633 [email protected] Rahmi MARINA (66) 2658 6300 ext 1395 • Strategy • Consumer • Diversified • Consumer Staples & Durables (62) 21 8066 8689 [email protected] THAI Quang Trung, CFA, Ka Leong LO, CFA [email protected] • Oil & Gas Deputy Head, Institutional Research (852) 2268 0630 [email protected] • Banking & Finance Sukit UDOMSIRIKUL Head of Retail Research (84 28) 44 555 888 x 8180 • Consumer Discretionary & Auto Aurellia SETIABUDI (66) 2658 5000 ext 5090 [email protected] Mitchell KIM (62) 21 8066 8691 [email protected] • Real Estate • Construction • Materials (852) 2268 0634 [email protected] [email protected] Ekachai TARAPORNTIP Deputy Head LE Nguyen Nhat Chuyen • Internet & Telcos • Property 66) 2658 5000 ext 1530 (84 28) 44 555 888 x 8082 Ricky NG, CFA Janni ASMAN [email protected] [email protected] (852) 2268 0689 [email protected] (62) 21 8066 8687 Surachai PRAMUALCHAROENKIT • Oil & Gas • Regional Renewables [email protected] (66) 2658 5000 ext 1470 NGUYEN Thi Ngan Tuyen, • HK & China Properties • Cigarette • Healthcare • Retail [email protected] Head of Retail Research • Auto • Conmat • Contractor • Steel Sonija LI, CFA, FRM (84 28) 44 555 888 x 8081 (852) 2268 0641 [email protected] Suttatip PEERASUB [email protected] • Gaming PHILIPPINES (66) 2658 5000 ext 1430 • Food & Beverage • Oil&Gas • Banking Stefan CHANG, CFA Minda OLONAN Head of Research [email protected] TRUONG Quang Binh, (852) 2268 0675 [email protected] (63) 2 849 8840 • Media • Commerce Deputy Head, Retail Research • Technology – Regional [email protected] Sutthichai KUMWORACHAI (84 28) 44 555 888 x 8087 Tony REN, CFA • Strategy (66) 2658 5000 ext 1400 [email protected] (852) 2268 0640 [email protected] Katherine TAN [email protected] • Rubber Plantation • Tyres & Tubes • Oil & Gas • Healthcare & Pharmaceutical (63) 2 849 8843 • Energy • Petrochem TRINH Thi Ngoc Diep Termporn TANTIVIVAT [email protected] (84 28) 44 555 888 x 8208 • Banks • Construction (66) 2658 5000 ext 1520 [email protected] INDIA Luis HILADO [email protected] • Technology • Utilities • Construction Jigar SHAH Head of Research (65) 6231 5848 [email protected] • Property NGUYEN Thi Sony Tra Mi (91) 22 6623 2632 [email protected] • Telcos Jaroonpan WATTANAWONG (84 28) 44 555 888 x 8084 • Strategy • Oil & Gas • Automobile • Cement (66) 2658 5000 ext 1404 [email protected] Vishal MODI THAILAND [email protected] • Port Operation • Pharmaceutical (91) 22 6623 2607 [email protected] • Transportation • Small cap • Food & Beverage Maria LAPIZ Head of Institutional Research • Banking & Financials Sorrabhol VIRAMETEEKUL Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 NGUYEN Thanh Lam Neerav DALAL Head of Digital Research (84 28) 44 555 888 x 8086 [email protected] (91) 22 6623 2606 [email protected] (66) 2658 5000 ext 1550 [email protected] • Strategy • Consumer • Materials • Ind. Estates • Software Technology • Telcos [email protected] • Technical Analysis • Oil & Gas • Telcos Vishal PERIWAL • Food, Transportation Sittichai DUANGRATTANACHAYA (91) 22 6623 2605 [email protected] Wijit ARAYAPISIT (66) 2658 6300 ext 1393 • Infrastructure (66) 2658 5000 ext 1450 [email protected] [email protected] • Services Sector • Transport • Property • Telcos • Strategist THE DOOR TO ASEAN PROPERTY 134 TERMS FOR PROVISION OF REPORT, DISCLAIMERS & DISCLOSURES DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. 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Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report. Hong Kong: As of 25 March 2018, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report. India: As of 25 March 2018, and at the end of the month immediately preceding the date of publication of the research report, KESI, authoring analyst or their associate / relative does not hold any financial interest or any actual or beneficial ownership in any shares or having any conflict of interest in the subject companies except as otherwise disclosed in the research report. 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THE DOOR TO ASEAN PROPERTY 137 OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. 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