27
Sector Update, 29 June 2015
ASEAN Real Estate
Opportunities Amid Macroeconomic Volatilities 3 3
2
2 We believe 4Q15 is a better timing to re-enter the property market in the Stock picks Rating TP ASEAN region, as we expect a recovery by end-2015. Near-term outlook AP Thailand BUY THB8.35 seems challenging, but we see opportunities in Thailand and Indonesia Sansiri BUY THB2.30 as both may speed up their infrastructure spending after a sluggish 1H. Pruksa BUY THB31.30 Property sectors in both countries are currently trading at below mean BSDE BUY IDR2,400 valuations and Thailand is likely to have lower currency risk. SMRA BUY IDR2,000 Infrastructure developments and economic growth are key drivers for ASEAN property markets. Infrastructure is the main theme for the property sector especially for under-developed Indonesia and Thailand, and to some extent Malaysia. While execution is lagging, we believe the potentially slow economic growth will put pressure on Indonesia and Thai Governments to speed up infrastructure spending in 2H15-2016. This should rebuild market expectations. Within the ASEAN region, we expect Thailand to have the strongest pick up in economic growth of +3.4% in 2015 from +0.7% in 2014. Potential rate hike by US Federal Reserve (US Fed) gradually built into expectation. The concern on an interest rate hike by the US Fed has sparked off a period of currency volatility (particularly IDR and MYR) in the region in 1H15. We think the volatility should continue into 3Q, given our expectation of a rate hike in September. Hence, 4Q is a better timing to revisit the property sector in the region.
Reaching the end of policy tightening cycle. The regulatory tightening cycle is nearing an end for Singapore and Malaysia, while the risk for Malaysia Indonesia and Thailand should be minimal. The recent clarification on the property tax revisions and relaxation of the LTV (loan-to-value) rule Loong Kok Wen CFA +603 9207 7614 and foreign ownership of property should lift the sentiment in Indonesia [email protected] over the short term. Alia Arwina +603 9207 7608 Long-term growth for Indonesia. We expect the housing boom in Indonesia to continue for another five years given the rising productive [email protected] workforce till 2020 and burgeoning middle-class group. Despite the near- term economic challenges, demand for properties will be underpinned by Sin gapore large domestic demand as well as lower mortgage rate and financing availability. We like mass housing developers in Indonesia. Ong Kian Lin +65 6232 3895 Thailand to recover ahead of Indonesia and Malaysia. We expect kianlin.ong@rhbgroup,com 2015 new property sales to grow 25% and 20% for Thailand and Ivan Looi +65 6232 3841 Indonesia, while Malaysia to fall by 10% YoY. Given a more stable ivan.looi@rhbgroup,com currency and lower dependence on oil revenue, we believe Thai property market will likely recover faster. Malaysia is expected to be slower due to the GST impact in addition to the existing cooling measures. Meanwhile, Thailand the Singapore market is likely to depend on the timing of elections and subsequently, the Government’s stance on housing policies.
Wanida Geisler +66 2862 9748 Valuations. The emerging economies are generally suffering from [email protected] slower economic growth this year. Both Indonesia and Thailand’s property sectors are currently trading at below mean valuations, and we
think the latter will likely outperform over the near term (3Q) given the Indonesia more stable THB. The Indonesian property sector should pick up in 4Q as President Joko Widodo’s (Jokowi) economic reform will likely provide Lydia Suwandi +6221 2970 7203 greater visibility by then. The fundamentals for Malaysia, however, look [email protected] weaker with less attractive valuations at this juncture. Stock picks. These include AP Thailand, Sansiri, Pruksa Real Estate (Pruksa), Bumi Serpong Damai and Summarecon Agung.
See important disclosures at the end of this report Powered by Enhanced Datasystems’ EFATM Platform 1
ASEAN Real Estate 29 June 2015
Table Of Contents ASEAN Property: At a Glance 3
Investment Summary 4
The Basics And The Fundamentals 8
Population 8 GDP growth 9 Mortgage availability 11 Infrastructure developments anchor South-East Asia property market growth 13 Recent decentralisation trend as land values rise 22 At the end of a tightening cycle 27 Sensitivity to interest rate hikes and changes in property cycle 31 Inflation and interest rate outlook 33 Key risk to our call 34 Valuations 35
Indonesia – Prospects May Improve In Late 2015 36
Thailand – Current Valuations Are Attractive 42
Malaysia – Lacks Near-Term Re-Rating Catalysts 44
Singapore – Policy Stance Depends On Election Results 47
Top Picks 51
Company Highlights 52
Regional Property Universe 56
See important disclosures at the end of this report 2
ASEAN Real Estate 29 June 2015
ASEAN Property: At a Glance Thailand Indonesia Malaysia Singapore Sector rating Neutral Neutral Neutral Neutral
Current sector Sector P/E at -0.5SD Sector P/E at -0.5SD; 47% discount to RNAV Sector P/B at mean valuations 58% discount to RNAV (around mean)
Stock picks AP Thailand Bumi Serpong Damai Sunway CapitaLand Sansiri Summarecon Agung Matrix Concepts Pruksa Paramount Quality Houses
Economic growth √ √ √ √ √ √ √ √ +3.4% in 2015F +5.0% in 2015F +5.0% in 2015F +3.5% in 2015F (+0.7% in 2014) (+5.1% in 2014) (+6.0% in 2014) (+2.9% in 2014)
Population √ √ √ √ √ √ √ 15m in Greater Bangkok 28m in Greater Jakarta 7m in Greater Klang Valley 5.5m in Singapore
Household debt / GDP √ √ √ √ √ √ √ 85.9% in 2014 16.1% in 1H14 87.9% in 2014 75.8% in 3Q14
Infrastructure √ √ √ √ √ √ √ √ developments For the first seven months IDR290trn budget allocated Construction of MRT1 Upcoming infra plans (Oct - Apr), 58.4% of the for infra spending. progresses as scheduled. include expansion of railway THB2.575trn budget was Momentum was slow in 1H, Works for MRT2 are network and MRT lines disbursed. Key projects in but more contracts will be expected to be tendered out the pipeline include tendered out from mid-2015. in mid-2016. motorways, double-track, airport expansion and MRT Orange line.
Government policy √ √ √ √ √ √ √ √ √ Least aggressive. A higher The government has just The government has Most aggressive with eight LTV cap was imposed for recently relaxed the LTV banned developers' interest rounds of measures. The the high-end luxury rule and foreign ownership bearing scheme, raised real latest one being the segment. of property. These should property gain tax, and the introduction of Total Debt ease the negative impact central bank requires Servicing Ratio to cap the from the PPh22 tax revision calculation of household ratio at 60% of monthly earlier. debt based on net salary. income. Since 2012, mortgage approval rate has declined. Key concerns √ √ √ √ √ √ √ √ (i) Political risk - any further (i) Currency risk; (i) Negative sentiment (i) Sharper-than-expected delay in elections may (ii) Slower-than-expected arising from the controversy rate hike in US could have a create an overhang in the economic growth due to of a strategic development negative impact on asset market: slow infra spending and company owned by the prices. (ii) Slower-than-expected weak commodity prices Ministry of Finance; economic growth due to (iii) Unemployment risk - (ii) Political risk; slow infra spending and textile, footwear, mining, (iii) Currency risk weak crop prices O&G, cement and auto industries have reported a number of layoffs.
Conclusion √ √ √ √ √ √ √ √ Sector valuations have Overhang from property tax Sentiment dented and we Potential re-rating will come reflected potential weak revision is over, and expect longer sector from the possibility of policy economic growth. More relaxation of LTV and recovery due to the easing, which should stable currency trend should foreign ownership rules has additional impact from depend on the timing and help to bring investors' helped to re-rate the sector goods and services tax results of elections. confidence in the sector. recently. However, the (GST) implementation. expected rate hike by the US Fed in Sept will likely bring currency volatility. The economic growth momentum in 2Q/3Q is also worth monitoring.
√ √ √: Most favourable √ √: Average √ : Least favourable
See important disclosures at the end of this report 3
ASEAN Real Estate 29 June 2015
Investment Summary Infrastructure theme and economic growth are key drivers Although the execution of projects has been lagging behind, we believe the slower economic growth ought to put pressure on the Indonesian and Thai Governments to speed up their infrastructure spending in 2H15-2016. The market should rebuild its expectation correspondingly. Infrastructure developments are especially important to drive the property sector in the region. This is true for Indonesia and Thailand, where roads and rail projects (specifically Indonesia) are under-developed. Malaysia, on the other hand, has better road infrastructure when compared with Indonesia and Thailand, but its rail network within the Klang Valley is behind its neighbours. Therefore, over the medium term, the real estate in these three countries is likely to experience positive transformation, given better connectivity. Singapore, where infrastructure developments are relatively more matured, is also looking to extend its rail network. However, the impact on its property sector may be limited as the price differentials for projects that are near and not-so-near Mass Rapid Transit (MRT) stations narrow as the density of MRT stations/network increases over time. Among Indonesia, Thailand and Malaysia, Indonesia appears to have the urgency to accelerate its infrastructure spending, from political will and social benefit perspectives. The new government under Mr Jokowi has allocated a big budget of IDR290trn on capital spending, which is 60% higher than the spending in 2014. The Central Government plans to build 620km of toll roads and 2,575km of other roads by 2019, as well as 49 dams, 24 seaports and 15 airports, and adding tens of thousands of megawatts (MW) to the archipelago’s patchy electricity grid. Thailand is also planning a number of big projects. These include the Bang Pal-in-Nakhon Ratchasima motorway and three double-track projects (Jira junction-Khon Kaen, Prachuap Khiri Khan-Chumphon and Chachoengsao-Kang Koi) totalling THB115.7bn, as well as the Phase 2 expansion of Suvarnabhumi Airport and MRT Orange Line. As for Malaysia, the Government has set aside MYR48.5bn for gross development expenditure. The key mega infrastructure and property projects currently under construction or slated for implementation over the near term include Iskandar Malaysia (MYR383bn), Sarawak Corridor of Renewable Energy (SCORE) (MYR334bn), Refinery and Petrochemical Integrated Development (RAPID) (MYR89bn), the Klang Valley MRT (comprising MRT1, MRT2 and MRT3) (MYR73bn), Penang Transport Master Plan (MYR27bn), and the Kuala Lumpur- Singapore High Speed Rail (HSR) (MYR40bn) among others. Within the ASEAN region, we expect Thailand to have the strongest pick up in economic growth of +3.4% in 2015 from +0.7% in 2014. The growth should come in stronger in 2H, as the military government steps up its effort in accelerate infrastructure development. Although Indonesia, Thailand and Malaysia are all suffering from weak commodity and crop prices (as well as crude oil price for Malaysia), Indonesia’s economy ought to be largely supported by its strong domestic consumption given the big population base. We think its property sector would have a rapid recovery in late 2015 as the execution of infrastructure projects gain momentum. The market has priced in the economic growth prospects too early in 2H14 after Indonesia’s general elections, and we note that the new economic model under Mr Jokowi may take time to realise, with 2H15-2016 as better timing to have a stronger visibility on the progress of economic reform. Malaysia, on the other hand, has higher dependence on oil revenue, which is not favourable to economic growth given the current low crude oil price. Additionally, despite the weak MYR, export numbers are still discouraging. We think the country would likely have to go through a weak period too in 2Q-3Q due to the implementation of the GST from April.
See important disclosures at the end of this report 4
ASEAN Real Estate 29 June 2015
Almost at the end of a policy tightening cycle Post the subprime crises in 2008/2009, the region has enjoyed ample financial liquidity. Given the near zero global interest rate environment, asset prices have experienced a massive appreciation. In view of the rampant consumer debt growth and increasing household leverage, the governments and central banks in the region have imposed various measures to cool the property markets and manage the rising household indebtedness. Among the four ASEAN countries, Singapore has the most aggressive measures, followed by Malaysia. In our view, overall risk of further tightening is low. This is because certain countries such as China have started to unwind some of its policies. Recently, its Central Government lowered the required down-payment for second home purchase in an effort to revive the slowing property market. Meanwhile, other countries such as Singapore are also mulling over potential policy easing, but nothing has been officially announced thus far, and we think the Singapore Government would be cautious with its policy stance given the round of tightening in Hong Kong in 1Q. We believe Thailand and Malaysia are likely to keep their prudent macroeconomic measures unchanged – at least for this year – given their highly indebted households. Note that Thailand’s and Malaysia’s household debt per GDP ratios are among the highest in the region at 85.9% and 87.9%, respectively. Indonesia, on the other hand, recently introduced a new PPh 22 luxury tax and maintained the PPnBM tax. The actual impact on the sector may be limited, as the policy is mainly targeting the rich, and demand from Indonesia’s big population base is mainly for mass housing, a segment that many developers have key exposure in.
The longer term prospects Indonesia – encouraging long-term growth prospects. Indonesia is our preferred market over the longer term, given its favourable demand/supply fundamentals. We believe the country’s housing boom is set to continue over the next five years, largely in view of its maturing demographic profile and, hence, rising middle-class group, as well as the large scope of infrastructure developments that Indonesia could potentially do in future. According to the Masterplan for Acceleration and Expansion of Indonesia’s Economic Development (MP3EI), in 2020-2030 the country’s dependency index would be at its lowest point and, hence, its productive workforce will be one of the highest in the region. The Greater Jakarta area alone already has a population of 28m, ie almost equivalent to the population size of Malaysia. Thailand – opportunities for medium-term growth but unstable political landscape may swing sentiment. Thailand, on the other hand, faces an aging population trend. The Greater Bangkok area has a population size of about 15m (with 8m in Bangkok City alone). Properties near transit lines and the mid-/high-end segments should fare better over the medium term, while the weak upcountry areas may only revive once agricultural/crop prices (rubber and rice) recover. This year, the Thai economy is projected to rebound to +3.4% from +0.7% last year, on the back of a recovery in domestic demand, particularly in business and government spending, as well as consumer spending. However, due to the delay in infrastructure spending, GDP growth of 3.0% in 1Q15 was weak and there are concerns that full-year growth will fall below 3.0%. In our view, any further delay in calling for elections is likely to deter investors’ interest in the market, dampening sentiment on the property sector as well. Malaysia – a relatively matured housing market. The Malaysia property market, to some extent, has reached a certain saturation/urbanisation level, with only an over 7m population within the Klang Valley. Infrastructure developments, including roads and highways, are relatively more developed compared with Indonesia, and perhaps Thailand. Over the near term, Malaysia is the only one in the region that is likely to experience a slower economic growth of about 5% this year from 6.0% in 2014. The recent decline in crude oil prices has worked against the Malaysia economy and has resulted in a slowdown in economic growth due to the country’s high dependence on oil export revenue. The implementation of the GST, as well as the high loan rejection rates by commercial banks, were amongst the key concerns for the sector in 1H15. In a longer run, the Kuala Lumpur-Singapore HSR could boost the Klang Valley real estate market further, especially the city centre, given the improved connectivity. Singapore – a matured housing market. All eyes are on the potential policy easing. This would depend on the timing and the results of the upcoming elections and, hence, the policy stance that will be adopted ought to have an impact on the local property sector. For now, we prefer developers with minimal exposure in the residential sub-segment. Exposure to the retail/office/mixed development segments is more favourable.
See important disclosures at the end of this report 5
ASEAN Real Estate 29 June 2015
Affordable housing is generally a common trend in the region. The property sectors in the region have experienced a common trend over the last two years, as demand mainly concentrated on affordable housing. Due to the unprecedented influx of liquidity in 2011-2013, real estate prices in the region have surged tremendously and, given that income growth has not caught up at the same speed, housing affordability has become the key social and political issue. The central banks and governments in the region have, therefore, introduced many rounds of prudent macroeconomic measures and property price growth is now largely under control. However, as the supply of affordable housing is still limited, many developers are now increasing their portfolio exposure in this segment by either moving their developments away from core city centres so that land costs are cheaper, or are shrinking unit sizes to manage the absolute unit pricing. In the current subdued period, with the exception of Thailand, we prefer affordable/mass housing players for the Indonesia and Malaysia markets. For Thailand, we like the mid-/high-end segment as the targeted group of buyers are relatively spared from the weak crop prices.
Key concerns for each country over the near term Indonesia. While the tax issues on the property sector have been largely cleared, the country is now experiencing an economic slowdown. Given Indonesia’s dependence on commodity exports, the softening commodity price outlook is not expected to be favourable to economic growth. Consumption is weakening, as seen from declining motorcycle sales and the cut in working hours for vehicle manufacturers. Also, Indonesia is the only country in the region that suffers from a twin-deficit problem with relatively high inflation. The central bank’s move to cut interest rates prematurely in February translated into a weak IDR. Meanwhile, a great deal of optimism had been built in on the ability of Mr Jokowi to institute reforms and grow the country’s economic potential. If the new government continues to delay its capital spending, this could likely derail our GDP growth forecast. Thailand. Slower-than-expected economic recovery – given the slow disbursement of government expenditure for infrastructure projects – and weak commodity prices could potentially dampen the recovery in consumer spending. Historically, political risk has always been high for Thailand and we think sporadic instability would affect investors’ sentiment from time to time especially during the period ahead of the expected elections next year. Any further delay in calling for a general election could also potentially create an overhang in the market. Malaysia. Concerns over a strategic development company wholly-owned by the Ministry of Finance (MOF) and rising political tensions are the key issues overshadowing the country now, and the timeline to resolve these issues remains uncertain. Singapore. The key issue currently is the uncertainty over the relaxation of the cooling measures. Property sales have remained muted as such measures continue to be in place. As expectations for the cooling measures to be relaxed increases, weak home sales should continue to persist within the property market. Currency risk is generally one of the biggest risks for investors when investing in emerging markets. 3Q could be a critical period given the expectation of US Fed rate hike in September and, hence, currency movements could be volatile. The depreciation of the IDR and MYR of 7% and 6% YTD respectively has further dampened sentiment in the ASEAN region in 1H15. However, with expectation gradually being built in, we think 4Q ought to be a better timing to re-enter the sector in this region.
See important disclosures at the end of this report 6
ASEAN Real Estate 29 June 2015
Valuations The emerging economies are generally running the risk of weaker-than-expected growth this year. However, together with the expectation of a US Fed rate hike in 3Q, the regional equity markets have been on correction mode. Hence, we think the concerns could have been priced in to a certain extent. Both Indonesia’s and Thailand’s property sectors are now trading at below mean valuations, and we think the latter is likely to outperform over the near term, ie 3Q, given the more stable THB. The Indonesian property sector, meanwhile, should pick up in 4Q as Mr Jokowi’s economic reform would likely provide greater visibility by then. Malaysia, on the other hand, appears to have weaker demand and supply fundamentals. Valuations are also less compelling vis-à-vis those of Indonesia and Thailand. The concern on weak economic growth is further weighed down by issues relating to a MOF-owned GLC that has caused some political tensions. Given our macroeconomic view, our stock selections are Bumi Serpong Damai, Summarecon Agung, AP Thailand, Sansiri and Pruksa, which are mainly Indonesian and Thai developers. Apart from choosing the sector bellwethers, we like stocks that have good presales and earnings momentum. While Sansiri has a sound earnings turnaround story, Pruksa’s current valuations of 9x is worth a look. Any signs of an economic recovery ought to be favourable to mid-range to low-end developers, and market leader such as Pruksa are likely be prime beneficiaries.
See important disclosures at the end of this report 7
ASEAN Real Estate 29 June 2015
The Basics And The Fundamentals Population Among the four countries that we featured in this ASEAN Property Report, Indonesia has the largest population size, at about 258m, vs Thailand’s 68m, Malaysia’s 30m and Singapore’s 5.5m. Indonesia, Thailand and Malaysia all share a similar trend – they exhibit declining population growth, with Thailand showing the most severe decline. By comparison, Singapore’s population’s flow is very much driven by foreigner inflows. According to the World Factbook published by the Central Intelligence Agency (CIA), of these three countries, Malaysia has the youngest median age population (25.1), followed by Indonesia (29.2) and Thailand (36.2). Population has been the key growth driver for Indonesia. The most populous city in Java is Jakarta, ie the country’s economic, cultural and political centre. According to Euromoney, GDP per capita in Jakarta is about USD10,000 vs USD3,150 for the country. Hence, although the population of Jakarta is about 10m, the size can reach up to 20m during the day. Given the business activities and, hence, the urbanisation trend there, this has formed a new conurbation called Jabodetabek (or Greater Jakarta) that comprises Jakarta, Bogor, Depok, Tangerang and Bekasi. The 28m population in Greater Jakarta is almost equivalent to the population size of Malaysia. By contrast, Greater Bangkok and Greater Klang Valley only have population sizes of 15m and 7m respectively. Interestingly, Indonesia is now experiencing a transition period in the structure of its population productive age. According to the MP3EI, in 2020-2030, Indonesia’s dependency index ought to be at its lowest point and, hence, the productive workforce should be one of the highest in the region. This very much explains our expectation of a continued housing boom in Indonesia over the next five years. Singapore is one of the most overcrowded countries in the world. Given the restricted land size that Singapore has, the country has an average 7,713 people per sq km of land. This is much higher when compared with Malaysia, Indonesia and Thailand. Hence, there is limited growth opportunity within the city state, given the population density, unless the Government revisits its foreign immigration policies and tightening measures.
Figure 1: Population growth trend for Indonesia, Thailand and Malaysia
Source: World Bank
See important disclosures at the end of this report 8
ASEAN Real Estate 29 June 2015
Figure 2: Indonesia’s demographic structure
Source: Masterplan for Acceleration and Expansion of Economic Development of Indonesia (MP3EI)
Figure 3: Singapore has one of the highest population densities in the world Country Name People per sq km of land Rank (out of 246) Macao SAR, China 18,942.3 1 Monaco 18,915.5 2 Singapore 7,713.1 3 Hong Kong SAR, China 6,845.2 4 Bahrain 1,752.9 5 Indonesia 137.9 74 Thailand 131.2 77 Malaysia 90.4 110 Iceland 3.2 242 Australia 3.0 243 Namibia 2.8 244 Mongolia 1.8 245 Greenland 0.1 246 Source: RHB, World Bank
GDP growth Macroeconomic growth has been the key driver for property markets in the region, but, unfortunately, the South-East Asian economies did not report encouraging GDP growth in 1Q. The growth outlook for the developing countries ought to hinge on the commodities/crop price movements, as well as the speed of infrastructure spending and, hence, the multiplier effect. Indonesia started off with high GDP growth expectations, but the consensus growth forecast has subsequently been cut to around 5.0% or slightly below (from 5.1% in 2014). Although Indonesia, Thailand and Malaysia are similarly suffering from weak commodities and crop prices (as well as low crude oil prices for Malaysia), Indonesia’s economy ought to be largely supported by strong domestic consumption given its big population base. We think its property sector should have a rapid recovery in 2H15, as the overhang from the luxury tax revisions are over and the economic growth is back on track when the capital spending picks up. Demand and supply dynamics are also more favourable in Indonesia as the wealth effect rises. Coming off from a low base (GDP growth in 2014 was +0.7%), we expect the Thai economy to pick up this year at +3.4%. Growth in 1H15 was weak (1Q15 GDP growth was at 3.0% YoY) due to the delays in carrying out infrastructure developments, but we are hopeful that construction projects ought to gain momentum in 2H15. This year, some industry experts expect the number of new launches and completed residential units to grow 5-10% from 2014, on the back of a GDP growth estimate of 3-4%. Hence, if growth falls below 3%, the slowdown in the property sector should be material.
See important disclosures at the end of this report 9
ASEAN Real Estate 29 June 2015
Malaysia is the only country with weaker GDP growth expectations this year. RHB’s economics team predicts a growth of 5.0% from a stronger 6.0% in 2014. The strength of GDP growth in Malaysia is also not up to expectations, as the country’s 1Q15 GDP growth was only +5.6% YoY from +5.7% in 4Q14 and +5.6% in 3Q14. Growth in the coming quarters may slow further, given the impact of GST implementation. The rebound in crude oil prices may, however, help to support growth somewhat. We, therefore, expect residential property transaction volumes to fall by 3-5% in 2015 after a flat growth of 0.4% in 2014. Meanwhile, the economic growth in Singapore is likely to be moderate. We estimate a GDP growth of +3.5% for 2015 from +2.9% in 2014 and +4.1% in 2013, supported by domestic demand and a pick-up in exports with the improving US economy.
Figure 4: Indonesia’s GDP growth vs % change in the Figure 5: Thailand’s GDP growth vs % change in the JAKPROP Index SETPROP Index
120% 7% 140% 10%
100% 120% 6% 8% 80% 100%
60% 5% 80% 6% 60% 40% 4% 4% 40% 20% 20% 3% 2% 0% 0%
-20%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2000 2% -20% 0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -40% -40% 1% -2% -60% -60%
-80% 0% -80% -4%
% change in JAKPROP Index GDP Grow th (%,y-o-y) % change in SETPROP Index GDP Grow th (%,y-o-y)
Source: Bloomberg Source: Bloomberg
Figure 6: Malaysia’s GDP growth vs % change in the KLPRP Figure 7: Singapore’s GDP growth vs % change in the FSTRE Index Index
60% 10% 100% 18%
80% 16% 8% 40% 14% 60% 6% 12% 20% 40% 10% 4% 20% 0% 8% 2% 0%
6%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -20% -20% 2000 0% 4% -40% 2% -40% -2% -60% 0%
-60% -4% -80% -2%
% change in KLPRP Index GDP Growth (%,y-o-y) % change in FSTRE Index GDP Grow th (%,y-o-y)
Source: Bloomberg Source: Bloomberg
See important disclosures at the end of this report 10
ASEAN Real Estate 29 June 2015
Mortgage availability Another supportive factor that drives the housing industry in Indonesia is the rising availability of mortgages. Unlike Singapore, Malaysia and Thailand, which have a more matured or relatively high banked population, we believe more Indonesians should have access to the banks given the low base effect. This is because the middle class group expands in tandem with stable GDP growth over time. In addition, the level of household debt to GDP ratio also appears to be more favourable in Indonesia, suggesting room to grow in the housing mortgage segment. According to the information in Figure 9, the 12% of population earning more than USD4 per day translates into a sizeable middle-class population of over 30m. The developers in Indonesia should benefit, as most listed companies currently have only about 10-20% of their buyers purchasing properties using mortgage loans. This group of buyers is expected to rise in the coming years as the marginal middle-class population expands while the number of buyers paying by cash and cash instalments remains roughly similar. The access to financing in Singapore, Malaysia and Thailand, on the other hand, has already reached a certain matured level. Furthermore, the household debt to GDP ratio for both Malaysia and Thailand are among the highest in the region. Therefore, developers’ sales should be very sensitive to any regulatory tightening in the banking system. This is especially true for Malaysia.
Figure 8: Unbanked population in the region
Source: Accenture
Figure 9: Indonesia’s middle class structure
Source: Asian Development Bank (ADB)
See important disclosures at the end of this report 11
ASEAN Real Estate 29 June 2015
Figure 10: Indonesia’s household debt to GDP ratio Figure 11: Thailand’s household debt to GDP ratio
% Indonesia % Thailand 18 100 16.1 15.5 16 90 85.9 14.4 82.3 13.9 14.1 14.2 77.3 80 14 70.6 70 63 12 10.6 61.4 60 54.6 55.6 10 8.9 8.7 8.7 46.8 48.4 47.6 7.9 50 45.1 8 40 6 30
4 20
2 10
0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1H14 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Central bank, RHB Source: Central bank, RHB
Figure 12: Malaysia’s household debt to GDP ratio Figure 13: Singapore’s household debt to GDP ratio
% Malaysia % Singapore 100 90 83.7 86.8 87.9 77.1 90 80 75.8 81.3 73.3 69.2 68.8 69.3 70.0 76.2 66.6 66.6 80 72.4 74.5 70 64.2 66.7 69.1 68.8 70 63.5 65.7 65.9 60.4 60 60 50 50 40 40 30 30 20 20
10 10
0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3Q14
Source: Central bank, RHB Source: Central bank, RHB
Figure 14: FY13 payment profile for Indonesian developers Figure 15: FY14 Payment profile for Indonesian developers
100% 100% Title: Title: 5% 10% 10% 16% 14% Source: 15% Source: 90% 20% 20% 90% 25% 24% 80% 40% 80% 40% Please fill in the values above to have them entered in your report Please fill in the values above to have them entered in your report 70% 32% 70% 30% 37% 60% 50% 57% 60% 43% 60% 50% 50% 54% 57% 80% 40% 40% 50% 50% 30% 30% 52% 50% 49% 20% 20% 40% 37% 35% 33% 10% 10% 21% 19% 10% 10% 0% 0% 5% ASRI IJ LPKR IJ BSDE IJ CTRA IJ SMRA IJ APLN IJ ASRI IJ LPKR IJ BSDE IJ CTRA IJ SMRA IJ APLN IJ
Mortgage Cash installment Hard Cash Mortgage Cash installment Hard Cash
Source: RHB, Companies data Source: RHB, Companies data
See important disclosures at the end of this report 12
ASEAN Real Estate 29 June 2015
Infrastructure developments anchor South-East Asia market growth The successful implementation of infrastructure developments is not only expected to have a direct positive impact on economic growth, but also a spillover effect to the property sector. Infrastructure projects are typically important for developing countries in boosting their economies. The South-East Asian region, particularly Indonesia, Malaysia and Thailand, is likely to see extensive infrastructure spending over the next 5-10 years, which should transform the real estate landscape in a longer term.
Indonesia – expect multiplier effect from infrastructure spending The lack of infrastructure quality and quantity has always been the pullback of Indonesia’s economic and social development. According to World Economic Forum Global Competitiveness Index (GCI) 2013-2014, the country ranked 61st out of 148 economies with regards to the state of its infrastructure. Lack of adequate infrastructure has caused high logistics costs (in particular transportation costs) for both land and sea. According to data published by the Indonesia Chamber of Commerce and Industry (KADIN), logistics costs account for 17% of a company’s total expenditure vs regional peers’ 10%. This has reduced the country’s competitiveness and attractiveness from an investment perspective.
Figure 16: Logistics cost as a percentage of production costs and GDP Countries Share to GDP Share to Cost Transportation Japan 10 5 Singapore 8 6 Malaysia 13 8 Indonesia 27 17 Thailand 15 10 China 19 12.5 Source: Indonesia Chamber of Commerce and Industry (KADIN)
The main obstacles for investment in Indonesia’s infrastructure are: i. Lack of financial resources. The Government’s budget allocation for infrastructure spending has been relatively small – at only 4% of GDP – over the last 10 years, falling behind other countries such as China and India with spending levels of 10% and 7.5% of their GDP for infrastructure, respectively. Therefore, private sector participation is needed to help part funding. Of course, a conducive investment climate is important to bring in the private sector, but it has been difficult for Indonesia to provide such an environment as law enforcement is weak, albeit improving gradually. ii. A clear legal framework involving land acquisition. Historically, due to land disputes, several numbers of infrastructure projects have been idle for years and cancelled altogether.
However, the new government under Mr Jokowi has put the acceleration of infrastructure requirements for the nation as a top priority. For the first time in Indonesia’s history, the Government has set a bold 2015 budget by cutting the energy subsidy (IDR158trn) and ramping up spending for infrastructure (IDR290trn). The Central Government has an ambitious target of building 620km of toll roads and 2,575km of other roads by 2019, as well as 49 dams, 24 seaports and 15 airports. It is also looking to add tens of thousands of MWs to the archipelago’s patchy electricity grid.
See important disclosures at the end of this report 13
ASEAN Real Estate 29 June 2015
Figure 17: For the first time ever, Indonesia’s infrastructure budget is higher than the energy subsidy
Source: RHB
As part of his strategy to make up for lost time, Mr Jokowi passed a third update to the 2012 land law earlier this year in an attempt to restart stalled or mothballed projects. As a result, investors are now permitted to raise independent funds for land acquisition and will be repaid later by the Government. Note that the approved Land Acquisition Law (UU No 2/2012) in late 2011 was made to speed up the land acquisition process, including the revocation of land rights to serve public interest. It also sets time limits for each phase of the procedure and safeguards holders of the rights to the land. Nonetheless, the risk is always in the execution.
The ambitious capital spending plan has, unfortunately, come in below expectation. Low tax collection in 1Q15 has raised concerns on the possibility of a further delay in infrastructure developments. Progress on spending has fallen by almost 50% YoY, accounting for only about 2% of the 2015 capital spending budget. We believe the delay in government projects is mainly due to the timeline of the tender process. According to the Ministry of Public Works and Public Housing, there are around 3,000 projects worth IDR19trn (out of a total of 13,773 projects valued at IDR94trn) that will be ready for tendering from May-Jul 2015. Note that, as at 1Q15, the new contracts that the four listed state-contractors have secured are worth IDR16.9trn (+22.8% YoY). To be prudent, our construction analyst in Indonesia only expects a realisation rate of 65%, or IDR189trn, taking into consideration the structural changes in the ministry’s organisation. We, therefore, expect the boost in infrastructure to be more visible in Mr Jokowi’s second year of his term in office.
Figure 18: Shortfall of infrastructure spending and revenue Budget - Q1 YoY growth rates 2013 2014 2015 Revenue 5.9 55.8 -8.8 Vat & Luxury 15.3 13.1 -13.9 Expenditure 11 5.4 28.1 Infrastructure 1.1 -24.8 -49.5 Surplus/Deficit % GDP -2.5 2 -2.2 Source: MOF
See important disclosures at the end of this report 14
ASEAN Real Estate 29 June 2015
Figure 19: More rapid toll road developments in the western areas of Greater Jakarta
Source: Various media
We believe toll roads are the most important infrastructure development to drive property values in Indonesia. Alam Sutera in Serpong is a popular case study of land appreciation, as its land price – previously at IDR650,000-750,000/sqm in 1996-2005 – doubled to IDR1.3-1.7m/sqm on the back of significantly better accessibility due to the company’s direct toll road access which makes its project the closest real estate development compared with other developers in the Serpong area, such as Bumi Serpong Damai, Summarecon Agung and Lippo Karawaci. Similarly, Bumi Serpong Damai also experienced similar land appreciation, whereby the going price in BSD City in 2002 ranged at IDR500,000-1m/sqm, only to double when the Jakarta- Serpong toll road was completed in 2005. With the completion of the last section of the Jakarta Outer Ring Road 1 (JORR1, which connects Kebon Jeruk and Ulujami) in Jul 2014, land prices in BSD City have risen to IDR12m-15m/sqm.
Figure 20: Alam Sutera Realty’s land price appreciation (in Figure 21: Land prices in BSD City IDRm/sqm)
16.0 14.0 Title: Title: 14.4 13.7 Source: 12.0 Source: 14.0 12.0 Please fill in the values above to have them entered in your report Please fill in the values above to have them entered in your report 12.0 10.0 10.0 9.0 8.0 8.0 5.5 5.5 6.0 6.0 4.6 3.8 3.8 4.0 4.0 3.3 2.5 2.5 2.0 1.3 2.0 1.0 0.5
- - 2007 2008 2009 2010 2011 2012 2013 2014 1 2 3 4 5 6 7
Source: Company data Source: Company data
See important disclosures at the end of this report 15
ASEAN Real Estate 29 June 2015
Thailand – plans for MRT line extension need to be executed In Thailand, not much infrastructure projects have taken place in 1H15, but there are signs that the momentum is picking up. For the first seven months of its FY15 (ie Oct 2014-Apr 2015), 58.4% of the THB2.575trn Budget was disbursed. At the same time, 36.2% was disbursed from the THB449bn investment budget. The Government is targeting for 87% of the total investment budget to be disbursed in 2015. With a remaining balance of 28.6% for the last five months of 2015, and with disbursement rates averaging 6-7% in the April-May period, the target looks likely to be achieved. Our construction/contractor analyst expects the Bang Pal-in-Nakhon Ratchasima motorway and three double-track projects (Jira junction-Khon Kaen, Prachuap Khiri Khan-Chumphon and Chachoengsao-Kang Koi) totalling THB115.7bn to be up for bids in 2H15. These projects have already obtained environmental impact assessment (EIA) approvals and are ready for bidding. Meanwhile, the bidding for Phase 2 of the expansion of Suvarnabhumi Airport and MRT Orange Line may begin in end-2015 or early 2016. There is a slight delay here, as the alignment for MRT Orange Line has been tweaked and requires EIA approval again, while the National Council for Peace and Order (NCPO) is still reviewing the Suvarnabhumi Airport Phase 2 project. The property market in Thailand has long been focused on Bangkok and nearby provinces like Samut Prakarn, Patum Thani and Nonthaburi. We believe the expansion of the mass transit system to 100km in 2013 and 464 in 2029 from 74km in 2010 ought to continue fuelling the long-term growth for Bangkok’s property market. According to CBRE, the downtown market is in a relatively healthy condition. We expect the prices for both newly-launched downtown condominiums, as well as the existing condominium projects located in the best downtown locations, to continue to rise. The increase in land prices to more than THB1m per square wah (1 sq wah= 4 sqm) , especially in the downtown areas along existing mass-transit lines, has forced developers to develop condominium projects that command luxury to super luxury prices of above THB170,000psm. CBRE also forecasts that the starting price of newly-launched condominium projects in the most prime downtown locations in 2015 will be around THB200,000 to THB300,000psm.
Figure 22: Planned infrastructure projects in Thailand for 2015-2016 Value (THBbn) Potential projects in 2015 133.2 MRT Orange Line 95.0 Double-track: Klong 19-Kaengkhoy 10.8 Double-track: Jira-Khonkaen 27.4
Potential projects in 2016 303.3 MRT Yellow Line 31.7 Double Track: Nakornprathom-Huahin 20.0 Double Track: Mabkabao-Jira Junction 21.0 Double Track: Lopburi-Paknumpo 24.0 MRT Pink Line 26.7 Double Track: Prachuabkirikhan-Chumporn 16.9 Suvarnabhumi Phase II 62.0 Motorway: Bang Pal-in-Nakhon Ratchasima 61.0 Motorway: Bangyai-Kanchanaburi 40.0
Other potential projects New standard 1.435m gauge dual track 370.5
Total 807.0
Source: NCPO, RHB
See important disclosures at the end of this report 16
ASEAN Real Estate 29 June 2015
Figure 23: Mass transit lines in Bangkok
Source: BTS
Figure 24: Bangkok’s mass transit market share Figure 25: Existing and future rail mass transit length (km)
Source: Ministry of Transport, BTS Source: Ministry of Transport, BTS
See important disclosures at the end of this report 17
ASEAN Real Estate 29 June 2015
Malaysia – MRT, HSR and LRT the key focus As for Malaysia, statistically, the solid performance of the construction sector in recent years – and its strong prospects ahead – are reflected in: i) a sustainable uptrend in the construction GDP of Malaysia, and ii) the rising value of projects awarded annually. The construction GDP in Malaysia grew to MYR33.0bn in 2014 from MYR19.3bn in 2009, representing an impressive CAGR of 11.2%. RHB projects the uptrend to continue, albeit at a more moderate pace of 7.7% and 8.0% in 2015 and 2016 respectively. Resilient public infrastructure spending ought to be able to cushion the slowdown in oil & gas and property sectors. Despite the weak crude oil prices, the Malaysian Government has kept its amount of gross development expenditure of MYR48.5bn unchanged in its revised 2015 Budget. This shows its strong commitment towards public spending. Among the key mega infrastructure, property and industrial projects currently under construction – or slated for implementation over the near term – include Iskandar Malaysia (MYR383bn), SCORE (MYR334bn), RAPID (MYR89bn), the Klang Valley MRT (Lines 1, 2 and 3) (MYR73bn), Penang Transport Master Plan (MYR27bn), the Kuala Lumpur-Singapore HSR (MYR40bn) and West Coast Expressway (MYR5bn). Key projects that ought to benefit the real estate sector are the MRT and HSR. While Line 1 is currently under construction, the alignment for Line 2 has just been put up for public display. The full completion of Line 2 is expected to be in 2020.
Figure 26: Key mega projects in Malaysia Project Type/nature MYRbn Iskandar Malaysia Economic zone/Property 383 SCORE Industrial 334 Bandar Malaysia Property 150 RAPID Industrial 89 Klang Valley MRT Infrastructure 73 Kwasa Damansara Property 50 Kuala Lumpur-Singapore HSR Infrastructure 40 Tun Razak Exchange (TRX) Property 40 Pan Borneo Highway Infrastructure 27 Penang Transport Master Plan Infrastructure 27 Bukit Bintang City Centre (BBCC) Property 10 LRT3 (Bandar Utama-Klang) Infrastructure 9 Gemas-Johor Bahru double- Infrastructure 8 tracking Penang Undersea Tunnel Infrastructure 6 Train 9, Malaysia liquefied natural Industrial 6 gas (MLNG), Bintulu West Coast Expressway Infrastructure 5 Kuala Lumpur 118 Property 5
Source: RHB, Media reports
See important disclosures at the end of this report 18
ASEAN Real Estate 29 June 2015
Figure 27: Construction GDP in Malaysia
40.0 20.0% Title: Source: 18.0% 35.0 Please fill in the values above to have them entered in your report 16.0%
30.0 14.0% 12.0%
25.0 10.0%
8.0% 20.0 6.0%
15.0 4.0% 2009 2010 2011 2012 2013 2014 2015F 2016F
Construction GDP (MYRbn) (LHS) Chg (RHS)
Source: RHB, Bank Negara Malaysia (BNM)
Empirical evidence has shown that infrastructure developments have created a significant impact on real estate prices. For instance, the opening of the Penang Second Bridge in Mar 2014 has caused massive price appreciation of land and properties in Mainland Penang. From 2011 to 2014, we estimate that land and landed property prices have already appreciated by approximately 50-100% and 30-50%, respectively. Similarly, developers also raised selling prices for their projects that are near the MRT stations in the Klang Valley. Some developments in Kuala Lumpur suburbs are already going at MYR1,000-1,200psf, which almost matches prices of some high-end condominiums in the city centre area.
Figure 28: Land public transport masterplan - the future rail network within the Greater Klang Valley
Source: MRT Corp
See important disclosures at the end of this report 19
ASEAN Real Estate 29 June 2015
Singapore – railway line to double by 2030 Land scarcity in Singapore is a well-known fact. As reported by the Land Transport Authority (LTA), roads in Singapore take up 12% of the total land area vs 14% for housing. This should make the trade-off between using land space for roads and for other purposes more acute in the coming years. Due to the reason above, Singapore is expected to witness slower growth in road networks in the future, which also implies that public transport such as MRT would play a more critical role than before. It is the only sustainable way to meet the competing needs of transport growth and land use.
Figure 29: Roads in Singapore have become more congested in recent years
1,000,000 Title: 290 Source: 270 900,000 Please fill in the values above to have them entered in your report 250
230 800,000 210
700,000 190
170
600,000 150
1996 1997 1999 2001 2002 2004 2006 2007 2008 2009 2011 2013 2014 1995 1998 2000 2003 2005 2010 2012
Population of motor vehicle Motor vehicle per km
Source: CEIC, RHB
To put into perspective, roads in Singapore have been most congested in recent years. It reached its peak at 282 motor vehicles per km of road in 2012 and declined to 279 motor vehicles per km of road this year, mainly driven by a lower number of private cars on the road. The current congestion on the road, together with the stringent use of land for roads, has inevitably made public transport the key focus of the Government’s future development. Since the allocation of land for future roads is limited in Singapore, it seems that creating more connections within the public transport segment would be the most feasible to attain sustainability and liveability. As highlighted in LTA’s master plan 2013, the authority plans to expand the existing rail network, which is the main focal point of achieving better connectivity. Apart from expanding the rail network, authorities have engaged in discussions on increasing bus services, facilitating more walking and cycling, and expanding the network of roads. Of all these, expanding the rail network would be the key. Note that the expansion of the railway is in synergy with the Urban Redevelopment Authority’s (URA) long-term plan of decentralising the central business district (CBD), as it requires a strong public transportation network to support the flow of people and goods. From now to 2030, we expect a total of three new railway lines to be built, spanning over 110km across the island. These new railways are being built to provide alternative traveling routes, so as to avoid overcrowding as population expands up to 6.9m in 2030. Apart from adding new lines to the existing network, the Singapore Government has also planned to extend existing railway lines. According to LTA masterplan for 2013, between now and 2021, new train lines or line extensions are slated to open nearly every year, and the full completion would be achieved by 2030. By then, the length of Singapore’s railway would more than double, to 360 km by 2030 from the existing 128 km. Interestingly, thanks to the mega-transformation of the railway network, 80% of households will be a 10 min walk (estimate: less than 1km) from a MRT station by 2030 from 57% in 2013. This would certainly create a better quality of life, as travelling on a small island becomes much more convenient. At present, property projects which are near MRT stations are priced at a 10-20% premium to those that are not near one. We think that, with eight in 10 households within a 10 minute walk from a MRT station by 2030, this would subsequently likely soften developers’ pricing power over projects that are near a MRT station.
See important disclosures at the end of this report 20
ASEAN Real Estate 29 June 2015
Figure 30: Upcoming plans to expand the railway network in Singapore Expected full Approx. Lines Brief description See label completion length (km) Railway line runs from the northern region all the way to the eastern region. Commuters can Thomson-East Line by 2024 43 A start enjoying the service in stages from 2019.
Connecting the western region to the northern-western region for more convenient travelling. Jurong Region Line by 2025 20 B Travelers today heavily depend on bus as a mean of transport.
New railway line across the island. This provides commuters with another alternative for Cross Island Line by 2030 50 East-West travel to the current East-West Line. In addition, rail lines extends into the centre C of Punggol (Northern eastern region)
Extension of MRT lines
Comprises of 12 new stations from the north-western region to central region. This improves Downtown Line Stage 2 by 2016 16.6 D connectivity and saves travel time up to 30%.
Extends 4 new stations into industrials area in the western region. Commuters working in Tuas West extension by 2016 7.5 E this region will enjoy significantly better connectivity.
Downtown Line Stage 3 by 2017 21 Commuters get to travel to industrial areas in the eastern region in short travel times. D Connects Downtown Line, East-West Line and Thomson-East Coast Line to provide more Downtown Line 3 extension by 2024 2.2 F travelling options. Circle Line stage 6 by 2025 4 “Close the circle” by connecting Harbour Front station to Marina Bay station. G
To be built in tandem with the developments in Punggol North, future residents will have train North East Line extension by 2030 2 H access to the city centre as well as other parts of Singapore.
Source: RHB, LTA
Figure 31: Expanding Singapore’s railway network
A
C B H
E D
F
G
Note: *North-South Line extension has completed Source: RHB, LTA
See important disclosures at the end of this report 21
ASEAN Real Estate 29 June 2015
Recent decentralisation trend as land values rise As infrastructure develops and land value appreciates, particularly in the city centre areas – as a result of the influx of liquidity over the past 3-4 years – developers in the region have been busy expanding out of their respective country’s city centres. Some have even gone overseas. While we welcome diversification, as the growth in the city centres are maturing, it is important for developers to have sufficient balance sheet strength for expansion into new areas. For example, given the high land cost in London, Singapore, Sydney and Melbourne, Malaysian developers will need to have enough in their war chests for working capital, as the breakeven level for take-up rates is as high as 90%. Developers in upcountry Thailand will also need strong balance sheets to withstand the accumulation of unsold units, as demand in outer areas weaken.
Indonesia – Tangerang and Bekasi still the key focus Due to the congestion in Jakarta, developments in Indonesia have mostly been concentrated in the Greater Jakarta area. Some have even ventured out to other secondary cities such as Bandung, Surabaya, Yogyakarta and Semarang (all in Java). Outside Java, popular areas include Medan and Palembang (Sumatra), Balikpapan (Kalimantan) and Makassar (Sulawesi), among others. For the Greater Jakarta area, we believe that the Tangerang and Bekasi areas would remain active, given the strong population growth over the last decade. According to Procon (now Jones Lang LaSalle), in 2010, approximately 8,800 housing units were launched, bringing the total number of landed houses offered in Greater Jakarta to 357,400 units that year. In that period, Procon found that the Tangerang area was the most active in launching new projects, a with take-up rate of 41%, or around 330 units per month. This was followed by Bekasi, with a 25% take-up rate, or around 203 units per month. As of Dec 2010, the total planned area for residential estates within the Greater Jakarta area was approximately 42,700ha. A majority, or approximately 42% of the planned landed residential areas, are located in Tangerang, while Bekasi, Bogor and Jakarta make up 31%, 20% and 7% respectively. The residential absorption trend in Greater Jakarta continued to remain the same until 2014, with the pull factor for residents to move towards Tangerang – specifically in the Serpong area – being the rapid development of the toll road west of Greater Jakarta. Meanwhile, Bekasi’s population growth is mainly stimulated by the establishment of key industrial estates in the eastern part of Jakarta.
Figure 32: Map of Jakarta and Greater Jakarta
Source: Ernst & Young’s real estate newsletter
See important disclosures at the end of this report 22
ASEAN Real Estate 29 June 2015
Figure 33: Population growth in Jakarta and Greater Jakarta City Population Area, Km2 2000 2010 Growth CAGR Density, /Km2 Jakarta 740 8,389,443 10,187,595 2% 15,342 Bogor 119 6,259,645 5,722,266 -1% 8,000 Depok 200 1,143,403 1,738,570 4% 8,680 Tangerang 1,313 4,107,282 5,923,299 4% 4,511 Bekasi 210 3,332,296 4,965,272 4% 23,589 Total 2,582 23,232,069 28,537,002 2% 11,050 Source: Statistics Indonesia (BPS)
Figure 34: Housing units supply in Greater Jakarta (2H14)
Jakarta, 7%
Bekasi, 25% Title: Source:
Please fill in the values above to have them entered in your report
Tangerang, 47%
Bogor-Depok, 22%
Source: Cushman & Wakefield
Thailand – Bangkok and vicinities are still the most sustainable areas Thailand’s property sales are mainly concentrated in Bangkok and the vicinity. Condominiums have become increasingly popular over the past seven years, due to changes in lifestyle, a better mass transit system and the demand for good alternative investments. City condominium prices are on an uptrend, driven by the scarcity of land in the CBD area and stricter regulations for high-rise developments. Annual rental yields of 3-5%, in addition to the average appreciation of asset prices of 7-10%, appear to be attractive. In terms of geographical area, according to research from Thailand’s top property developer, Pruksa, around 60% of property sales are in and around Bangkok, while the remaining 40% are upcountry. The proportion of sales in the upcountry region has been falling from 50% in 2012, due mainly to the weakening of purchasing power in the rural areas amid: i) soft farm prices, ii) the lack of a government stimulus package, and iii) the high household debt that resulted from the rice pledging scheme and the first-car policy. Poor purchasing power upcountry is understandable, as the people in the provinces are largely dependent on farm income, which has been sluggish for quite some time. We also concur with most of the Thai developers that two other factors that weakened the demand for condominiums upcountry are oversupply and the lack of proper infrastructure. Based on the gross regional product (GRP) per capita data, the purchasing power of residents in Bangkok and the vicinity, as well as provinces in the eastern seaboard area and central regions, are much stronger than that of people living in the northern, north-eastern, western, and southern parts of Thailand. Also, the late payments from the rice pledging scheme under the previous government, coupled with prolonged weak agricultural prices, have resulted in a severe debt problem in the northern and north-eastern regions. In general, about 60% of Bangkok households that earn less than THB25,000 per month are able to buy residential units priced at below THB1.5m. Only 15% of Bangkok households that earn more than THB50,000 per month (regarded as the mid- to high-income population) can afford a second home, either in Bangkok’s inner city or upcountry. For the provincial market, average household income ranges between THB17,000-28,000. This means that most Thai residents can afford residential properties priced below THB2m.
See important disclosures at the end of this report 23
ASEAN Real Estate 29 June 2015
Figure 35: New residential market value in Thailand Figure 36: Average monthly household income
Source: Pruksa Source: National Statistics office Figure 37: Gross regional product per capita Figure 38: Prices for condominiums in the CBD
Source: NESDB Source: CBRE Thailand
Figure 39: Solid demand for properties priced between THB500,000 and THB1.5m
Source: National Statistics Office, RHB
See important disclosures at the end of this report 24
ASEAN Real Estate 29 June 2015
Malaysia – township development to provide long-term growth Given the robust demand for properties in the last five years, Malaysian developers have been busy growing their landbanks, given the Malaysian’s general preference for landed properties. In addition, the demand for affordable housing has also risen in recent years, mainly due to the faster growth in property prices vs income growth (about 65% of total households in Malaysia have a monthly income of less than MYR5,000). Therefore, as land prices soar in the centre areas, big developers have gradually moved out of the core Klang Valley area, and bought sizeable landbanks (typically more than 500 acres) at lower prices in areas that are 30-40km away from the city centre so that they can provide landed, affordable homes. Currently, developers have moved housing projects closer to the southern part of the Klang Valley, ie in Kajang, Semenyih, Nilai, Bangi and Dengkil, leading towards the Kuala Lumpur International Airport (KLIA) enclave, as well as the Kota Kemuning area. The transition is understandable. First, infrastructure developments have extended to the southern part of the Klang Valley, ie MRT1 and potentially the HSR. Second, the terrain in this part of the Klang Valley is generally flatter when compared to the northern part. There is also more freehold land in these areas. Some new developments have also expanded to Seremban, where the Government has proposed a HSR stop in the future. Meanwhile, a few developers have also bought land in the northern part of the Klang Valley, such as Rawang and Serendah. Opportunities could still exist in areas closer to the city centre. Some developers have also bought plots of land in matured areas or in areas close to MRT stations – such as Jalan Ipoh, Kepong, Petaling Jaya and Puchong – to build high-rise or affordable housing. At the northern side of West Malaysia, specifically in Mainland Penang, Seberang Prai is a new hot spot as the State Government has brought in significant catalytic investments at Batu Kawan, where the Penang Second Bridge is connected. Currently, Batu Kawan has attracted many educational institutions as well as commercial, industrial and property developments. These include the University of Hull, KDU University College, an IKEA outlet and shopping mall, a Design Village premium outlet, as well as the JV between Penang Development Corp and Temasek, which is slated to develop the Penang International Technology Park and Business Process Outsourcing Prime. The upcoming business activities would be well- supported by the existing industrial parks in the mainland area. Key developers that have exposure in Mainland Penang are Tambun Indah Land, an affordable housing player, as well as Eco World, Paramount, Global Oriental and Malton.
Figure 40: Developers with sizeable landbank >25km away from the Kuala Lumpur city centre Location Developer Total landbank (acres) Kajang Tropicana 166
Semenyih SP Setia 1,684 Eco World 1,311
Bangi Mah Sing 420 IOI Properties 360
Dengkil Gamuda 1,529 Sunsuria 350 IOI Properties 332 Paramount 237 Glomac 192
Kota Kemuning IJM Land 1,878 Tropicana 863 Eco World 309
Rawang / Serendah Gamuda 724 Mah Sing 445 WCT 728
Kuala Langat Gamuda 257
Source: Company, RHB
See important disclosures at the end of this report 25
ASEAN Real Estate 29 June 2015
While the Iskandar Malaysia region is suffering from oversupply issues, the new growth area has moved to Pengerang (the eastern part of Johor) to capture the demand from RAPID – a MYR60bn regional oil & gas hub spearheaded by Petronas, the national oil & gas company. Key developers with exposure to this area include IJM Corp (1,188 acres) and Malton (200 acres). Demand was encouraging when both IJM Corp and Malton rolled out their villas and shop lots at end-2014 and early 2015 respectively. While sentiment over the short term may be adversely affected by the weak crude oil prices, as Petronas may delay the development, long-term prospects remain positives – this is because some foreign oil & gas players are already committed their investments in RAPID. In anticipation of the maturing local property sector, some of the top-tier Malaysian developers have also ventured overseas to places such as London, Singapore and Australia, where property markets are more developed. Based on the sales performance of SP Setia, UEM Sunrise and Sunway, which have entered into these overseas locales, demand has been promising. This is largely because these developers can tap into clientele that come from Malaysia, as many buyers purchase properties in countries where their children are furthering their studies.
Figure 41: About 65% of total household has a monthly income of 35 30 25 20 15 10 5 0 < 499 500 - 999 1,000 - 1,500 - 2,000 - 2,500 - 3,000 - 3,500 - 4,000 - > 5,000 MYR 1,499 1,999 2,499 2,999 3,499 3,999 4,999 2007 2009 2012 Source: Economic Planning Unit Singapore – limited landbank but there are still pockets of opportunity The Singapore Government has been pushing to make Jurong the biggest destination for business and leisure outside the CBD. The steering committee was set up in Oct 2014 and led by Culture, Community and Youth Minister Lawrence Wong to drive development plans for Jurong Lake District (JLD), which clearly demonstrates the Government’s commitment to lift Jurong to new heights. With the advent of the “game-changing” Singapore-Malaysia HSR, which aims to cut down travel time between Kuala Lumpur and Singapore to just 90 minutes, the entire Jurong East site, including the lake districts, the Jurong East Gateway – touted to be Singapore's second CBD – and the site of the new terminus, will occupy an area of about 360ha. This is about the size of the current Marina Bay area in downtown Singapore. Singapore developers and companies that have a presence in JLD include CapitaMall Trust, CapitaLand, Heeton Holdings (HTON SP, NR), Lee Kim Tah (privatised), TT International (TTI SP, NR), Low Keng Huat (LKH SP, NR), Sim Lian Group (SLG SP, NR) and Genting Singapore (GENS SP, NEUTRAL, TP: SGD1.03). Progressively, after the JLD, we expect Singapore developers to decentralise and be more active in the upcoming Seletar Regional Centre, the North Coast Innovation Corridor, Southern Waterfront City and Paya Lebar Central – which are outside CBD land plots – to be further developed under the Government’s Land Use Plan in Jan 2013. There are also Singapore developers that have diversified overseas – the most notable being CapitaLand, which has 41% FY15 RNAV exposure to China, according to our estimate. City Development (CIT SP, NR) is still behind the game, with only 4% RNAV exposure, but, with the ongoing loosening of housing policies in China, this should boost its revenue from China even while the local markets are turning sluggish. See important disclosures at the end of this report 26 ASEAN Real Estate 29 June 2015 At the end of a tightening cycle The rounds of quantitative easing in the West, and the resulting ample financial sector liquidity and near zero global interest rates were the main catalysts for the appreciation in asset prices over the last 3-4 years. Soaring property prices, and then affordability issues, were the top agendas for many governments that were tackling overheating property markets. The governments and central banks in the region, therefore, had to come out with various prudential macroeconomic measures to curb excessive property price growth. The authorities in Singapore and Hong Kong have introduced the most measures, whereas Malaysia, Thailand and Indonesia have seen relatively lower levels of policy tightening. Singapore. Within the ASEAN region, Singapore has been the most aggressive in its prudential macroeconomic policies. Eight rounds of measures have been introduced since 2009, with the latest one being the introduction of the total debt-servicing ratio (TDSR) framework to cap the ratio at 60% of monthly income, based on a medium- term mortgage rate of at least 3.5%. In our view, this is the most punitive measure, and one that has since dampened property demand in Singapore and caused the island-wide property price index to fall 5.9% from its peak in 3Q13. Demand for luxury homes has also been battered by the 15% additional buyer's stamp duty on foreign buyers. The non-landed residential properties in the Core Central Region (CCR) are bearing the brunt of this, with prices now down by 6.9% from their peak in 1Q13. However, it was the Rest of Central Region (RCR) properties that have corrected the most since 2Q13, with prices having declined by 7.4%. The Outside Central Region (OCR) – ie mass market properties – has proved the most resilient thus far, being down 4.2% since its peak in 3Q13. Given speculation, home prices and the fact that foreign buyers have moved to desired directions, the market has started to speculate that the Government may review the cooling measures this year. However, we believe such measures may not likely be lifted this year, largely because of the upcoming election. The Government’s stance on policy easing is likely to be conditional upon the results of the General Election. Malaysia. Outside of Singapore, Malaysia is also quite aggressive on its regulatory stance to curb the speculative purchase of properties and contain rising household debt. Various “demand-side” measures have been imposed since late 2010, and the affordability issue was also addressed via the provision of affordable housing under the 1Malaysia Housing Programme (PR1MA). PR1MA is a housing development programme under the Ministry of Housing and Local Government. It provides properties that are priced at MYR100,000-400,000 for all Malaysians with a monthly household income of MYR2,500-10,000. The most effective measure, in our view, is the prudent lending guidelines issued by the central bank, whereby the calculation of household debt should be based on net salary instead of gross salary. As a result, loan rejection rates have been high since 2012. The 2014 Budget also saw more punitive measures being announced, such as the elimination of the developer interest-bearing scheme (DIBS) as well as the significant hike in the real property gains tax (RPGT). These two measures have essentially eliminated speculative buying activities to a large extent and, collectively, have resulted in a slower growth of property prices since 2H13. Although the impact on the property market has largely substantiated the policymakers’ objective, we do not think the policies would be eased anytime soon, as household debt remains fairly high – even though its growth has slowed down currently. Indonesia. Indonesia has introduced both supply and demand-side policies, as the central bank indicated that the number of debtors holding multiple mortgages had been rising. Out of 35,002 debtors with two or more mortgages, around 3,800 have 3- 9 mortgages. As a result, in 2013, Bank Indonesia (BI) introduced more prudent policies to manage mortgage lending by lowering the LTV cap for second property purchases onwards, mainly to clamp down on speculation. In addition, the developers are currently working around tighter working capital as banks adjust their mortgage disbursement schedules. For first-time buyers, banks disburse mortgages based on the construction progress, ie 50% when the foundation is completed (in the third month), 30% when topping off (seventh month), 10% during handover (ninth month) and the final 10% during the sales and purchase agreement (which can be up to a year later). For second-home buyers, a mortgage can only be disbursed upon the completion of the properties. In the past, almost 100% of the mortgage was disbursed by banks within the first three months after signing the mortgage agreement. Since the implementation of these measures, BI has noted that the number of borrowers with more than one housing mortgage has declined. Thus, we believe the current set of measures is already sufficient. See important disclosures at the end of this report 27 ASEAN Real Estate 29 June 2015 In the meantime, however, objective of the recently-proposed revision in property taxes is to strengthen the government coffers. On 30 Apr, the Ministry of Finance announced the super luxury tax (PPh22), whereby 5% tax is charged for properties valued at more than IDR5bn vs more than IDR10bn previously. Building areas that are classified as luxury properties would not be subject to the new tax, ie 5% will be charged for building area with more than 400sqm for landed homes and more than 150sqm for apartments. This rule will take effect on 1 Jun 2015. Although the threshold for luxury properties is now lowered, we believe the negative impact will not be material, as PPh22 is a withholding tax and tax deductible to buyers’ annual income tax, and many developers have been offering more affordable or lower-priced property products to better cater to demand. Recently, the Government also announced that another luxury tax, the super luxury tax (PPnBM), was to be kept unchanged. On a brighter note, the central bank indicated that it will loosen the LTV rule soon, by potentially lowering the down payment for first-time home buyers to 10-20% from the current 30%. Down payments for second and third homes may also be adjusted as well. We are upbeat on this as this should offset the negative sentiment that has been lingering since PPh22 took effect. Thailand. Thailand has the least aggressive policies. Thus far, the Bank of Thailand has only adopted the “demand-side” measure to curb excessive speculation. A higher LTV cap was imposed for the high-end luxury segment (for properties priced above THB10m per unit), but the impact of regulatory tightening has not been severe. Meanwhile, the local media has also reported that inheritance and property taxes could be imposed – although no details have been forthcoming thus far. In our view, the overall risk of a further tightening is low, as certain countries such as China have started to unwind some of their policies. Recently, its Central Government lowered the required down-payment for second home purchases in an effort to revive the cooling property market. Meanwhile, other countries such as Singapore are also mulling over potential policy easing, but nothing has been officially announced thus far – and we believe the Singapore Government would be cautious with its policy stance in light of the tightening of policies in Hong Kong earlier this year. We believe Thailand and Malaysia may likely keep their prudential macroeconomic measures unchanged, at least for this year, given their high household debts (their household debt/GDP ratios are among the highest in the region). Indonesia, on the other hand, may see a mixed set of policies, but we think the positive impact arising from the loosening of LTV could outweigh the negative impact from the luxury tax – as many Indonesian developers are largely exposed to the mass market. See important disclosures at the end of this report 28 ASEAN Real Estate 29 June 2015 Figure 42: Property cooling measures imposed in Singapore Round One - 14 Sep 2009 * Removed Interest Absorption Scheme (IAS) and Interest-Only Housing Loans (IOL) * Reinstated Confirmed List for 1H10 Government Land Sales (GLS) program * Non-extension of the Jan 2009 budget assistance measure for the property market Round Two - 19 Feb 2010 * Imposed a Seller's Stamp Duty (SSD) on all residential properties sold within a year of purchase * Lowered Loan-To-Value (LTV) to 80% for all loans made by MAS regulated institutions * Increased residential sites for sale in GLS program Round Three - 30 Aug 2010 * SSD is now imposed on properties sold within three years * Increased minimum cash payment from 5% to 10% for home buyers with outstanding home loans * Lowered LTV from 80% to 70% for home buyers with outstanding home loans * Households with monthly income between $8,000 to $10,000 can now buy new DBSS flats; previous limit was $8,000 * Increase minimum occupation period (MOP) for non-subsidied HDB resale flats to five years * Disallowed concurrent ownership of HDB and private property. Resale HDB flat buyers have to sell all private property within six months * HDB will increase supply to 22,000 units in 2011 from 16,000 in 2010 Round Four - 13 Jan 2011 * SSD is now imposed on properties sold within four years * SSD rates would be raised to 16%, 12%, 8% and 4% for residential properties sold in the first, second, third and fourth year of purchase * Lowered LTV to 50% for purchasers who are not individuals and 60% to individuals with outstanding housing loans Round Five - 7 Dec 2011 * Additional Buyer Stamp Duty (ABSD): 10% for foreigners; 3% for PRs 2nd and subsequent property; 3% for Citizen's 3rd and subsequent property Round Five and a half - 4 Sep 2012 Effective 4 Nov 12, all new non-landed private residential developments outside the Central Area will be subjected to a cap on dwelling units (DUs) based on 70 sqm (753 sqft). Formula: Maximum number of DUs per development ≤ (MP Allowable GPR* x Site Area )/70 sq m Round Six - 6 Oct 2012 * Max tenure of residential property loans capped at 35 yrs. * 40% LTV for non-individual borrowers. * Loans exceeding 30 yrs or beyond retirement age of 65 yrs (1) 60% LTV with no outstanding loans (2) 40% LTV with outstanding loans. Round Seven - 11 Jan 2013 (Enacted 12 Jan 2013) 1) Measures affecting ALL residential property: a) ABSD raised across the board - i) Citizens: 7% for 2nd purchase; 10% for 3rd and subsequent purchase ii) PRs: 5% for 1st purchase; 10% for 2nd and subsequent purchase iii) Foreigners and non-individuals: 15% for ANY purchase b) Tighter LTVs for new housing loans to individuals with outstanding loans and non-individuals: i) For individuals with existing housing loan, LTV for 2nd housing loan is now 50% (or 30% of loan tenure >30 years or extends beyond borrower's retirement age of 65) ii) For individuals obtaining third or more housing loans, LTV will be 40% (or 20% if tenure >30 years or extends beyond retirement age) iii) For non-individuals, LTV will be 20%. c) Higher minimum cash down payment of 25% for new purchases for individuals with outstanding housing loans 2) Measures affecting public (HDB) housing: a) Capping of Mortgage Servicing Ratio (MSR): i) For purchasers applying for HDB housing loans, the MSR will be capped at 35% of gross monthly income. ii) For purchasers applying for MAS-regulated bank loans to purchase HDB flats, the MSR will be capped at 30%. b) Flat owners who are PRs are disallowed to sublet whole flat even after the Minimum Occupation Period (MOP). c) Flat owners who are PRs purchasing a private residential property in Singapore must dispose their HDB flats within 6 months of purchasing the private property (6 months after TOP/CSC for uncompleted projects). 3) Measures for Executive Condo (EC) developments: a) Maximum strata floor area of new EC units will be capped at 160 sqm. b) Sales of new dual-key EC units will be restricted to multi-generational families only. c) Developers of future Ecs can only launch units 15 months from date of award of site or after completion of foundation works, whichever is earlier. d) Private enclosed space (PES) and private roof terraces to be treated at GFA and counted under the bonus GFA and subject to payment of charges. 4) Measures for industrial property market: a) Imposition of Seller's Stamp Duty (SSD) for industrial properties and land sold within 3 years of purchase (15% is sold within 1st year; 10% if sold in the 2nd year and 5% if sold in the 3rd year) Round Eight - 28 Jun 2013 (Take effect 29 Jun 2013) FIs will be required to compute the TDSR, or the percentage of total monthly debt obligations to gross monthly income, on a consistent basis. The TDSR will apply to loans for the purchase of all types of property, loans secured on property,3 and the re-financing of all such loans. MAS expects any property loan extended by the FI to not exceed a TDSR threshold of 60% and will regard any property loan in excess of a 60% TDSR to be imprudent Source: MND, URA, HDB See important disclosures at the end of this report 29 ASEAN Real Estate 29 June 2015 Figure 43: Property cooling measures imposed in Malaysia Malaysia Nov-10 LTV cap at 70% for third mortgage onwards Jan-12 Calculation of household debt based on net salary Jan-12 RPGT for disposal within first two years was raised to 10% from 5% Jul-13 Shortened loan tenure to 35 years Debt service ratio to "vulnerable group" should not exceed 60% Oct-13 Budget 2014 (effective from 1 Jan 2014): RPGT for disposal within three years raised to 30%, whereas for disposal in year 4-5, the rates are 20% and 15% respectively. For non-citizens, 30% RPGT is imposed for disposal within the first five years. 5% RPGT is applied for disposal after the fifth year. Raising the floor price of properties for foreign buyers to MYR1m from MYR500k Removal of Developer Interest Bearing Scheme (DIBS) Source: RHB Figure 44: Property cooling measures imposed and tax incentives in Thailand Thailand LTV cap of 80% for residential property (both condominium and landed houses) priced above THB10m/unit LTV cap of 90% for condominium priced below THB10m/unit (from 1 Jan 2011) LTV cap of 95% for landed property priced below THB10m/unit (from 1 Jan 2011) Tax privileges for the first home buyer (Residential property bought and registered during 21 Sep 2011-31 Dec 2012) - Residential price no more than THB5m - 10% of residential price will be spread out equally as a tax deductible item for 5 consecutive years - Example: (Residential price THB5m x 10%) / 5 years = THB100,0000 ---> Tax deductible per year for the next 5 years Source: RHB Figure 45: Property cooling measures imposed in Indonesia Indonesia Maximum LTV Type First mortgage Second mortgage Third mortgage onwards House size > 70 sqm 70% 60% 50% House size 22 - 70 sqm NA 70% 60% House size < 70 sqm NA 70% 60% Apt size > 70 sqm 0.70 60% 50% Apt size 22 - 70 sqm 0.80 70% 60% Apt size up to 21 sqm NA 70% 60% Shophouses NA 70% 60% Mortgage disbursement On % progress Upon completion Upon completion (from banks to developers) Source: RHB See important disclosures at the end of this report 30 ASEAN Real Estate 29 June 2015 Figure 46: YoY % change in Indonesia’s house price index Figure 47: YoY % change in Thailand’s house price index 16% 25% 14% 20% 12% 10% 15% 8% 10% 6% 4% 5% 2% 0% 0% Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 -5% Nov-09 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 Jabodebek-Banten Composite of 16 cities Single-detached house (incl. land) Tow n house Condominium Source: Bank Indonesia Source: Bank of Thailand Figure 48: YoY % change in Malaysia’s house price index Figure 49: YoY % change in Singapore’s private residential property price index 30% 50% 25% 40% 20% 30% 15% 20% 10% 10% 5% 0% 0% 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 -10% 1Q00 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 -5% 1Q07 -20% -10% -30% Malaysia Penang Johor Sabah Source: NAPIC Source: URA Sensitivity to interest rate hikes and changes in the property cycle While the regional markets are mulling over potential rate hike by the US Fed, the softening economic growth has prompted the central banks in Thailand and Indonesia to cut interest rates. The deflationary environment arising from weak commodity prices – and, hence, tapering inflationary pressure – is the supportive factor for the central banks to do so. We believe the lower mortgage rates ought to help to support the property markets in both Thailand and Indonesia and, hence, the high household indebtedness in the former should not be a big concern over the next one year. For Thailand, although its household debt to GDP ratio of 85.9% is among the highest in the region, the household leverage could be somewhat overstated. This is because the amount includes farmers that borrow for working capital and not for consumption. Hence, the changes in the property cycle could have a lesser impact on the Thais. Indonesia has the lowest household leverage among the four countries. This is understandable as only about 20% of buyers finance their properties by bank mortgages. A large portion of buyers normally opt for cash instalments, followed by cash payments. This group of purchasers typically comprises high net worth individuals and – to a certain extent – the mid- to high-income group. See important disclosures at the end of this report 31 ASEAN Real Estate 29 June 2015 Between Singapore and Malaysia, the former appears to have a better footing to withstand a downcycle in the property market. Singapore has a stronger household balance sheet when compared with Malaysia, given that Malaysian household leverage (defined as household debt divided by household assets) is much higher at 46.7% in 2014. Although the household debt in Singapore grew faster than Malaysia’s, its household leverage remains comfortably low compared to pre-global financial crisis periods (above 20% in 2001-2003). Even after taking into account that property prices are generally more volatile, according to our estimates (ceteris paribus), the value of residential property would have to drop by more than a third (- 36%) before leverage revisits its 20% mark. We believe this is a remote case. For both Singapore and Malaysia, housing loans form the largest proportion of household debt (73.8% for Singapore and 51.2% for Malaysia). The percentage is higher in Singapore, given the lesser amount of hire purchase/car loans. While the growth in the housing loans in Singapore has moderated to 5.5% in 2014 from 12.9% in 2010, the growth in Malaysia has been rather consistent at about 13% YoY every year over the same period. We believe the trend in housing indebtedness ought to be under control, considering that the governments and/or central banks of both countries have adopted various prudential macroeconomic measures to curb credit growth. As long as unemployment rate remains stable, slower-than-expected interest rate hikes should provide buffers to the property markets. The key risk is, of course, a drastic turn in the global economy, which could negatively affect consumption, employment and asset values. Figure 50: Household leverage for Singapore Figure 51: Household leverage for Malaysia MYR bn 300 22 1,000 Title: 48% Source: 21 900 47% 250 20 800 Please fill in the values above to have them entered in your report46% 19 700 200 18 45% 600 17 500 44% 150 16 400 15 43% 100 14 300 42% 13 200 41% 50 12 100 0 40% 1995 1996 1998 1999 2000 2003 2004 2007 2008 2011 2012 2013 1997 2001 2002 2005 2006 2009 2010 2014 2010 2011 2012 2013 2014 HH Debt (SGD b) As % of HH assets (RHS) HH Debt As % of HH assets (RHS) Source: Statistics Singapore (SingStat) Source: BNM Figure 52: Mortgages as percentage of household debt for Figure 53: Mortgages as percentage of household debt for Singapore Malaysia MYR bn 250 75 450 Title: 51.5% 400 Source: 51.0% 200 350 Please fill in the values above to have them50.5% entered in your report 74 300 50.0% 150 250 49.5% 100 200 49.0% 73 150 48.5% 50 100 48.0% 0 72 50 47.5% 2011 2012 2013 2014 2008 2009 2010 2007 0 47.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 Mortgages (SGD b) As % of HH debt (RHS) Mortgages As % of HH debt (RHS) Source: SIngStat Source: BNM See important disclosures at the end of this report 32 ASEAN Real Estate 29 June 2015 Figure 54: Significance of mortgage (as percentage of total household and system loans) 70 60 50 40 30 20 10 0 Indonesia Thailand Malaysia Singapore Mortgage/Total HH Loans % Mortgage/System Loans % Source: RHB Inflation and interest rate outlook The lower crude oil prices should be supportive of a more moderate inflation in the region. High inflation has been the key concern for Indonesia. The country, which has rationalised its fuel subsidy from 1 Jan 2015, is likely to see more stable inflation going forward. This is because volatility in inflation in the past was mainly attributed to subsidised fuel price hikes and, to some extent, shocks in food prices. Over a longer term, given the Government’s effort to push for better infrastructure developments, which should keep logistics costs manageable and enhance the food supply chain, we expect the inflation rate to be more moderate. This should be favourable to lift consumer sentiment, which should spillover into discretionary spending, particularly for big-ticket items such as white goods and properties. Given our expectations, our consumer price index (CPI) growth estimate is around 6-7% for 2015 from 7-8% in 2014. Meanwhile, after an unexpected cut in policy rates by 25bps in Feb 2015, interest rates ought to be kept unchanged until the end of the year. Any rate cut may potentially bring volatility in currency movements and the equity market. Thailand cut its policy rate again at end-April by 25bps to 1.5%. This was a second rate cut in two months, signalling that economic recovery has been weaker than expected. The slower-than-expected recovery was due to softening private consumption and investment, and delays in public spending rollouts. Downside risk in economic growth could also come from exports of goods, given a potential slowdown in the economies of Thailand’s trading partners, eg China. The policy rate is likely to stay flat in 2H15. Meanwhile, headline inflation declined and turned negative in the beginning of the year due to the low global oil price. Nonetheless, we think core inflation should still be positive, as the prices of most goods and services continue to rise. Overall inflation rate should remain at a low level of around 1-2%. The inflation outlook for Malaysia should also be moderate, given lower commodity prices. January and February saw a slowdown in inflation, and the rate picked up slightly in March/April as retail fuel prices were raised by 14.7% in March, followed by the implementation of the GST on 1 Apr. The 6.0% GST is likely to add about 0.9ppts to the headline inflation for the 9-month period, after taking into account the postponement of the scheduled gas price hike for the industrial sector and a 5.8% reduction in electricity tariffs for four months from 1 Mar until 30 Jun. Hence, we expect overall inflation to be 2.3% in 2015 from +3.2% in 2014. We believe the strength of economic growth would likely be a more important consideration relative to inflation for monetary policy decisions in 2015. While there are expectations in the market for the central bank to cut interest rates to stimulate economic growth, RHB’s economics team expects that a cut in interest rate is unlikely, unless the economy slows down significantly. Therefore, the overnight policy rate (OPR) should remain stable at 3.25% in 2015. See important disclosures at the end of this report 33 ASEAN Real Estate 29 June 2015 Figure 55: Indonesia - policy rate lowered in Feb 2015 as Figure 56: Thailand - policy rate lowered in Mar 2015 as inflation eases economic growth slows % % 9 10 8 8 7 6 6 4 5 2 4 0 3 -2 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 2 -4 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-10 -6 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 May-10 May-11 May-12 May-13 May-14 May-15 CPI BI rate CPI Policy rate Source: Bloomberg Source: Bloomberg Figure 57: Malaysia - inflation vs policy rate Figure 58: Singapore - inflation vs 3-month SIBOR % % 10 8 7 8 6 6 5 4 4 3 2 2 0 1 0 -2 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-05 -1 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 -4 -2 CPI OPR CPI 3M SIBOR Source: Bloomberg Source: Bloomberg Key risk to our call Although our preference is for Indonesia’s property market given its large population base – as well as our expectation on higher infrastructure spending and higher economic growth – there is also an investment risk that we would like to highlight. Its currency, the IDR has weak fundamentals and we note that the Indonesian economy has twin deficit problems with relatively high inflation. BI’s move to cut its policy rates in Feb 2015 prematurely has translated into a weak IDR. Changes in US Fed rate typically has a big implication on IDR given the high foreign holdings of financial assets in the country. The twin deficit problem remains the key issue, as the deficits would need to be financed. Political risk is the key investment risk for Thailand. A referendum on the new charter and to legitimise the new constitution is slated for Jan 2016. Therefore, the election would likely take place only in 2H16. Any further delay in calling for an election, in our view, is likely to create an overhang in the market. The key risk is the resurgence of political upheavals from supporters of ousted former prime ministers Yingluck and Thaksin Shinawatra. Meanwhile, the slower-than-expected economic recovery, coupled with weak commodity prices, could also post potential risk if the Government continues to disburse budget expenditure for infrastructure projects at a slow pace. See important disclosures at the end of this report 34 ASEAN Real Estate 29 June 2015 For Malaysia, the downside in economic growth and currency ought to be the key investment risks. If crude oil prices stay below USD55 per barrel (bbl), which is the assumption made in the revised 2015 Budget, there could be further downside to our GDP growth forecast of 5.0%. The GST implementation has resulted in weak business and consumer sentiment in 1H15. Hence, developers are left with a narrow window of about six months to secure new sales for 2015. The concerns are complicated with issues related to a MOF-owned strategic development company that could lead to potential political risks. Similarly, Malaysia also shares the same currency risk as Indonesia. In anticipation of an interest rate hike in the US in September, the Malaysian market is currently seeing significant outflow of foreign funds due to the high foreign shareholding in Malaysian Government bonds and equities. For Singapore, a sudden and sharp rate hike in the US could also have a negative impact on asset prices in the country in an event of an abrupt flight of capital from Asia, since property-led prices decline as liquidity flows out of the city state. This would challenge our NEUTRAL call on the Singapore real estate sector. Conversely, should the US Fed delay the “lift-off” further to next year, liquidity could continue to flow back into Singapore and sustain asset prices once more. Valuations The emerging economies generally run the risk of weaker-than-expected growth this year. However, together with the expectation of a US Fed rate hike in 3Q, the equity markets in the region have been on correction mode. Hence, we think that concerns could have priced in to a certain extent. Both Indonesia’s and Thailand’s property sectors are now trading at below mean valuations. Downside should be limited, but negative sentiments on rate hikes and economic slowdowns is likely to deter investors’ appetite for high-beta and cyclical sectors over the short term. Against this backdrop, we think that Thailand’s property sector ought to have a better chance of outperforming over the near term, ie 3Q, given the more stable THB. The Indonesian property sector, which is now trading at a vast 58% discount to RNAV, should pick up in 4Q as Mr Jokowi’s economic reform is likely to provide greater visibility by then. Malaysia, on the other hand, appears to have weaker demand and supply fundamentals. Valuations are also less compelling when compared with those of Indonesia and Thailand. The concern on weak economic growth is further weighed down by issues related to a GLC that has caused some political tensions. Given our macroeconomic view, our stock selections are Bumi Serpong Damai, Summarecon Agung, AP Thailand, Sansiri and Pruksa, which are mainly Indonesian and Thai developers. Apart from choosing the sector bellwethers, we like stocks that have good presales and earnings momentum. While Sansiri has a sound earnings turnaround story, Pruksa’s current valuations of 8.8x is worth a look. Any signs of an economic recovery would also be favourable to mid-range to low-end developers, and market leader such as Pruksa are likely be a prime beneficiaries. Figure 59: Forward P/E for regional property indices (x) 30 25 20 15 10 5 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jan-09 Oct-09 Jan-10 Oct-10 Jan-11 Oct-11 Jan-12 Oct-12 Jan-13 Oct-13 Jan-14 Oct-14 Jan-15 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 JAKPROP SETPROP KLPRP FSTRE Source: Bloomberg See important disclosures at the end of this report 35 ASEAN Real Estate 29 June 2015 Indonesia – Prospects May Improve In Late 2015 Expect market to rebuild expectations on growth prospects Lydia Suwandi The equity market priced in the expectation of high potential growth after the Jul 2014 +6221 2970 7203 election. It subsequently corrected in early 2Q15, as economic growth was weaker than expected – 4.7% YoY in 1Q15 vs 5.0% YoY in 4Q14. We acknowledge that the [email protected] new economic model under Mr Jokowi would take time to kick off due to bureaucratic issues. Furthermore, the challenges would be material, especially immediately after the new government has just been formed. However, we believe the market may be able to chart better growth in late 2015-2016, as the Government will likely ramp up its capital spending soon after the weak growth in 1H15. This should benefit the property sector, which is highly correlated to macroeconomic growth. Strong support from domestic demand We believe Indonesia’s long-term growth would be underpinned by its large population and favourable demographic profile. Currently, about 60% of its population is under 40 years old, and given the burgeoning middle-class group, the robust domestic demand should fuel private consumption, which makes up 60% of total GDP output. This is expected to be the country’s key economic growth driver. Figure 60: 60% of the total population is under 40 years of age Figure 61: Growing middle class segments Source: UN population database Source: AT Kearney Lower mortgage rate and better financing availability Indonesia’s reference rate was cut to 7.5% from 7.75% in Feb 2015, which pointed to manageable and moderate inflation for the year. The lower interest rate has also led to lower mortgage rates. Mortgage availability is also improving, as several banks are targeting to boost the mortgage loan distribution by 8-19% YoY, with Bank Central Asia (BCA) (BBCA IJ, UR) being the first to introduce a special fixed interest rate of 8.88% for mortgages for three years, before capping it at 9.99% in the third to fifth year (the offer was from 9 Feb to 29 May) – marking a 25bps decrease from what it previously offered. Figure 62: Improving mortgage availability Banks 2014 2015F BCA 1% 8% BNI 5% 9% BTN 17% 19% CIMB -1% 15% Mandiri -4% 15% Source: Banks See important disclosures at the end of this report 36 ASEAN Real Estate 29 June 2015 Figure 63: List of mortgage rates Bank BCA Bank Niaga Bank Permata Fixed 1yr 9.25% Fixed 1yr 9.25% Fixed 1yr 10.75% Fixed 2yr 9.25% Fixed 2yr 9.50% Fixed 2yr 11.00% Fixed 3yr 9.75% Fixed 3yr 9.5%* Fixed 5yr 10.25% Renovation 11.50% Fixed 5yr 10%* Take over 13.75-13.99% Multi 1yr 11.25% Fixed and capped 3yrs 8.88%* Multi 2yr 12.25% Fixed and capped 4yrs 9.99%* Fixed and capped 5yrs 12%* Construction 11.50% * need to have BCA acc at least 1 year continuous Bank Mandiri Bank Rakyat Indonesia Bank Tabungan Negara Fixed 1yr 9.5%* Fixed 1yr 10% Fixed 1yr IDR500m 9.25% Fixed 2yr 10.75%* Fixed 2yr 10.25 Fixed 1yr IDR350m 10.00% After period ends - int rate moves to 13.25% Counter rate 12.00% Take over 12.75% Source: RHB Expect 20% growth in marketing sales this year Given the favourable macroeconomic factors, we expect the developers in our coverage universe to post marketing sales of IDR45.14trn for FY15, which implies a strong recovery of 20% YoY growth vs IDR37.74trn achieved in FY14 (+3% YoY). This is on the back of the launches of new clusters or property projects – with prices that are c.10-15% going forward. As at 1Q15, the property companies under our coverage recorded marketing sales of IDR8trn (+1.4% YoY) and made up 18% of our FY15 projection. Bumi Serpong Damai, one of our Top Picks, posted the best sales performance with its 1Q15 marketing sales of IDR2.2trn (+27% YoY). The amount comprised 30% of its FY15 marketing sales target of IDR7.5trn. We expect overall industry marketing sales to improve in the upcoming quarters, since 1Q is usually the weakest period and there were not many new launches in 1Q15. However, challenges such as property-related taxes may cause buyers to put off their decision to buy. Figure 64: Total marketing sales of Indonesian developers in our coverage (IDRm) 50,000 Title: 45,142 Source: 45,000 41,071 40,000 36,673 Please fill in the values above to have them entered in your report 35,000 33,187 30,000 25,000 21,420 20,000 15,000 10,000 5,000 - 2011 2012 2013 2014 2015F Source: RHB, Companies data See important disclosures at the end of this report 37 ASEAN Real Estate 29 June 2015 Figure 65: 1Q15 total marketing sales reached 18% of our FY15 estimate in IDRbn 3M15 2015F A/F ASRI IJ 315 5,800 5% LPKR IJ 1,400 6,000 23% BSDE IJ 2,234 7,501 30% CTRS IJ 345 2,388 14% CTRA IJ 1,741 10,745 16% SMRA IJ 1,200 5,600 21% APLN IJ 939 6,500 14% DILD IJ 252 2,996 8% Source: RHB, Companies data Net positive from the recent revision in taxes and LTV rule Earlier this year, the Government announced its plan to optimise potential revenue from non-oil & gas taxes (to help offset the decrease in the oil & gas income tax). This included planned revisions for taxes related to this sector, ie a tax on luxury properties (see Figure 66). The regulations state that any house purchased that can be classified as a luxury item would be subject to an additional cost of about 45% – comprising a value-added tax of 10%, a land and building transfer title fee of 5%, duty on the acquisition of land and building rights (BPHTB) of 5%, luxury tax (PPNBM) of 20% and super luxury tax (Art 22) of 5%. Before the Ministry of Finance signed the new income tax and luxury tax regulations on 30 Apr 30 and 8 Jun respectively, investors were confused over the price threshold for luxury properties. However, this has now been resolved. In our view, the latest tax revision is likely to put pressure on companies that have large exposure to luxury properties, such as Intiland Development (DILD IJ, NR), but the finalisation of the new rules would lead to more clarity and enable developers to decide on their next course of strategy. We are relieved that the sector overhang is now over. In addition to that, the central bank has formally announced the regulation for the loosening of the LTV rule by lowering the down-payment requirement. For conventional mortgages, for houses with an area of 70 sqm and above, the LTV ratio will change to 80% from 70% for first-home buyers. This means that the down-payment is now lowered to 20% from 30% previously. For second home buyers, the LTV will be raised to 70% from 60%, whilst for those buying their third home (and so forth), purchasers will be subjected to a LTV requirement of 60%. These are expected to alleviate the burden of most first home buyers, in our view. Meanwhile, for Shariah-based purchases, first-time home buyers now have a 15% down payment vs 20% previously. For second and third home buyers, the LTV would be 75% and 65% respectively. The LTV relaxation only applies to banks with gross non-performing loans (NPLs) of below 5%. BI Deputy Governor Mr Halim Alamsyah said that, while there are a few banks in that category, he believes the positives from the new LTV scheme are aplenty. This is because: i) property loans could increase by IDR15trn-20trn in FY15 and rise further to IDR80trn by 2016, ii) total loans may also increase as a result by 2-4% to 14% for FY15, and iii) GDP may grow by 5bps and rise by another c.20-30bps next year. According to BCA president director Mr Jahja Setiaatmadja, the impact of the LTV relaxation would be seen in 4Q15. He expects mortgages in 2015 to increase by 10% for the banks, ie at 8.88% (fixed) for three years, and at 9.99% (capped) for two years. This may result in the bank’s mortgage loans growing by 5%. Other banks such as Bank Negara Indonesia (BBNI IJ, UR) are also looking to increase their mortgage loans growth to 14% from 10%. This rule is expected to become effective in Jul 2015. See important disclosures at the end of this report 38 ASEAN Real Estate 29 June 2015 Figure 66: Tax revisions for luxury properties Type of tax Previous Current Status Income tax article 22 (PPh 22) Applied to luxury properties with value Super luxury properties valued Signed by Ministry of Finance of >IDR10bn per unit or condominiums at >IDR5bn per unit or on 30 Apr, took effect on 1 with a unit size of >150 sqm and condominiums with a unit size Jun landed houses of >500 sqm of >150 sqm and landed houses of >500 sqm Sales tax on luxury goods (PPnBM) Luxury properties are condominium Unchanged Signed by Ministry of Finance units with an area of >150 sqm and on 8 Jun and takes effect on landed houses with a building size 1 Jul >350 sqm Tax-based value (NJOP), NJOP is used as a reference for land The Government plans to use No update annual land and building value and guidance for the collection of the land value zoning system in withholding tax (PBB), PBB and BPHTB. However, NJOP 2016, which is expected to land and building transfer does not reflect the market value of more accurately reflect the fee (BPHTB) transactions and is often lower than the market prices than NJOP. market price Meanwhile, the elimination of PBB and BPHTB is only for houses of worship, hospitals and residential homes. PBB and BPHTB will only be applied to commercial buildings. Source: RHB, Ministry of Finance Figure 67: Revision on LTV policy for housing mortgage OLD NEW First mortgage Second mortgage Third mortgage & First mortgage Second mortgage Third mortgage & Onwards Onwards Conventional Financing House >70 sqm 70% 60% 50% 80% 70% 60% Apartment >70 sqm 70% 60% 50% 80% 70% 60% House 22-70 sqm N/A 70% 60% N/A 80% 70% Apartment 22-70 sqm 80% 70% 60% 90% 80% 70% House < 22 sqm N/A N/A N/A N/A N/A N/A Shophouses N/A 70% 60% N/A 80% 70% Shariah Financing House >70 sqm 80% 70% 60% 85% 75% 65% Apartment > 70 sqm 80% 70% 60% 85% 75% 65% Source: RHB, Bank Indonesia Prefer mid-end segment and Tangerang area We expect the Indonesian developers to continue offering more affordable or lower- priced properties that mainly target the mid- and mid-upper segments. Land area and building sizes may be adjusted to keep the developers’ absolute pricing at affordable levels, while maintaining their margins. The most preferred property price range for the mid- and mid-upper segments is IDR900m-1.6bn, for buildings of 60-138 sq m in area and land sizes of 62-240 sq m. Upcoming developments will likely see more high-rise or apartment units as well, given the challenges to replenish depleting landbank by acquiring new land at reasonable prices. See important disclosures at the end of this report 39 ASEAN Real Estate 29 June 2015 Figure 68: Mid and mid-upper segments made the most Figure 69: Best-selling unit types in 2H14 purchases in 2H14 House Segment Unit Price (IDRm) Favorite unit size (Sqm) 100% Title: Building Land 15% 90% 17% 19% Lower 200Source: to 335 36 to 42 90 to 120 31% 80% 45% 10% Lower-Middle 440 to 480 48 78 to 120 25% Please fill in the values above to have them entered in your report 70% 25% Middle 900 to 1,300 60 to 128 62 to 136 60% 28% 22% Upper-Middle 1,500 to 1,600 69 to 138 90 to 240 50% Upper 2,200 yp 4,900 117 to 240 105 to 269 40% 24% 28% Source: Cushman &Wakefield 30% 58% 60% 39% 20% 30% 10% 20% 6% 0% 4% Jakarta Tangerang Bogor-Depok Bekasi Greater Jakarta Lower Lower-Middle Middle Upper-Middle Upper Source: Cushman & Wakefield Figure 70: Eight of 18 developments to be launched in FY15 are mixed-use high-rise projects Ciputra Development - 4 projects Summarecon Agung - 1 project CitraGarden Hill Samarinda Residential Bandung Residential CitraGarden City Malang Residential Fatmawati Project High rise Bumi Serpong Damai - 4 projects CitraPlaza Kemayoran High rise Elements at Rasuna High rise Aerium Taman Permata Buana High rise Ciputra Surya - 4 projects Tanjung Barat High rise Citraland Jayapura Residential Samarinda Residential Citraland Lampung Residential CitraGarden Palu Residential Intiland Development -2 projects CitraGarden Kendari Residential 1Park Avenue High rise Kebon Melati High rise Ciputra Property - 2 projects Tanah Lot Bali Villa Agung Podomoro Land - 1 project Ascott Service Residence High rise Pluit City Residential Source: RHB, Company data Given the population CAGR of 4% from 2000 to 2010, we believe that Tangerang could continue to be the most active area for residential developments in Greater Jakarta, followed by Bekasi. According to Cushman & Wakefield, Tangerang is the biggest contributor to housing unit supply in Greater Jakarta, representing 47% of the total cumulative supply of 334,726 units as of 2H14. Key players which have projects in Tangerang include Alam Sutera, Bumi Serpong Damai, Lippo Karawaci and Summarecon Agung, while players with projects in Bekasi are Summarecon Agung, Lippo Cikarang and Bumi Serpong Damai. Figure 71: Summary of supply during 2H14 Planned area (ha) Developed area (ha) Supply (units) % Supply Jakarta 1,174 691 21,972 7% Tangerang 18,495 7,895 157,485 47% Bogor-Depok 19,615 3,465 73,163 22% Bekasi 11,531 4,295 82,105 25% Greater Jakarta 50,815 16,346 334,725 100% Source: Cushman & Wakefield See important disclosures at the end of this report 40 ASEAN Real Estate 29 June 2015 Sector rating: NEUTRAL We remain NEUTRAL on the sector, as the slow realisation of infrastructure spending could put pressure on Indonesia’ economic growth. In addition, the weakening IDR and a decline in household income from lower commodity trading (given the weak demand and commodity prices) should result in less household income and lower private consumption. We expect the economy to recover by end-2015 to early 2016, and greater visibility of the economic reform progress may result in a rebound in consumer confidence and expansion of businesses. Amid unfavourable economic conditions, we believe the sector’s long-term outlook remains attractive, as: i) Indonesia’s housing backlog will not be resolved anytime soon, ii) 50% of the country’s population is below the age of 30, and iii) the mortgage market remains under-penetrated. The sector’s forward P/E has dipped to 10.6x (or -0.4SD from the mean P/E), and it is currently trading at a 32% discount to the JCI’s forward P/E of 22.0x, as well as at a hefty 58% discount to RNAV. While the clarification on property tax revisions and the relaxation of LTV rule and foreign ownership of property will likely lift sentiment over the short term, we are cautious of a soft patch in economy given the recent weak vehicle sales in 2Q. We prefer developers with more exposure to landed residential developments. We like Bumi Serpong Damai given its large landbank, stable cash flow, growing recurring income base and potential growth in second-tier cities. We also like developers with solid recurring income such as Summarecon Agung, which has the potential to monetise its assets, as it may unlock the value of its investment properties. Figure 72: Indonesian property sector’s 12-month forward P/E 18.0 Title: Source: 16.0 15.5 13.4 14.0 Please fill in the values above to have them entered in your report 12.0 11.3 10.0 9.2 8.0 7.2 6.0 12 13 14 14 15 12 13 13 14 15 12 13 14 12 12 14 13 13 14 ------ - - - - - - ------ Oct Oct Apr Oct Apr Apr Apr Jun Jun Jun Feb Feb Feb Aug Dec Aug Aug Dec Dec ------ - - - - - - ------ 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 12-mo Forward P/E Mean +1 SD +2 SD -1 SD -2 SD Source: RHB Figure 73: The property sector’s P/E is at a 32% discount to the JCI 20 60% Title: 18 Source: 50% 16 14 40% Please fill in the values above to have them entered in your report X 12 30% 10 8 20% 6 10% 4 0% 2 0 -10% 12 13 14 12 13 14 12 12 13 14 13 14 15 13 15 14 12 14 13 ------ ------ - - - - - - Apr Oct Oct Apr Apr Oct Apr Jun Jun Jun Feb Feb Feb Aug Dec Aug Dec Aug Dec ------ - - - - - - ------ 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 JCI (LHS) Property (LHS) Discount to JCI (RHS) Source: RHB See important disclosures at the end of this report 41 ASEAN Real Estate 29 June 2015 Thailand – Current Valuations Are Attractive Wanida Geisler Near-term prospects weighed down by weak economic growth +66 2862 9748 We rate the Thai property sector as NEUTRAL. Our two main concerns are: i) weaker-than-expected YTD GDP growth, and ii) a delay in the approval of new [email protected] infrastructure projects which would put more pressure on investor sentiment. As the property market is 70%-correlated to GDP, any potential further downgrade of GDP estimates could adversely affect the sector outlook. In 1Q15, large developers such as Land and Houses, Pruksa and Sansiri sacrificed their margins to drive presales and toplines, amid a weak economic outlook and softening consumer confidence. Other negative factors include: i) weak purchasing power in the mid- to low-end segment given the high household debt, ii) poor demand in the provinces that are highly dependent on farm income, iii) an oversupply of condominiums in some big cities (eg Udon Thani, Khon Kaen, Hat Yai, and other tourist spots such as Pattaya, Hua Hin and Kao Yai), and iv) details not finalised with regards to the upcoming tax on properties and unused land, which may take effect in 2017. Wild cards that may re-rate the sector at year-end While interest on Thai property sector may be overshadowed by concerns over economic growth, we believe the sector may regain investor interest in 2H15, as public investments will likely kick off after numerous delays – putting 2015 economic growth on track to hit above 3.0% YoY (RHB’s forecast: 3.4%), from a low base of 0.7% YoY in 2014. Besides, a low interest rate environment is also an encouraging factor to drive the property market, as mortgage lending rates may potentially be lowered. We also expect developers’ margins to recover as residential prices are still on the rise while costs have been declining. Meanwhile, the asset monetisation theme is set to continue. Expect 25% YoY presales growth Despite the ongoing concerns, we still expect sector presales to grow 25% YoY this year, largely due to the low base in 2014. Sansiri will likely lead the pack, followed by AP Thailand and Quality Houses. Thus far in 1Q15, sector presales grew 56% YoY from a low base in 1Q14 amid political turmoil, and 19% QoQ. 1Q15 presales accounted for about 20% of the sector’s full-year target. Coming to 2Q15, presales should grow 12-13% YoY and QoQ, driving 1H15 presales to THB100bn, 45% of the sector’s full year target. Developers which are targeting the mid-range to high-end buyers so far have recorded spectacular YoY presales growth, while developers focusing on mid-range to low-end products as well as big-cap developers had a soft start to the year. Only Pruksa, a mid-range to low-end developer, booked a surprisingly strong 1Q15 presales growth, both YoY and QoQ. Figure 74: Breakdown of presales for 1Q15 1Q15 1Q14 YoY QoQ 2015 Target 1Q15 vs THBm THBm (%) (%) THBbn 2015 Target ANAN 9,355 2,139 337 96 23 41% AP 4,645 2,164 115 (10) 28 16% LH 5,600 6,564 (15) 11 32 18% LPN 3,450 3,188 8 (13) 20 17% PS 12,761 8,194 56 64 42 30% QH 4,900 4,200 17 (2) 24 21% SIRI 3,219 388 730 55 33 10% SPALI 3,200 3,463 (8) (45) 21 15% Total 47,130 30,300 56 19 223 21% Source: Company data, RHB See important disclosures at the end of this report 42 ASEAN Real Estate 29 June 2015 Figure 75: Annual presales for the sector (2008-2015F) Figure 76: Quarterly presales by developer (1Q13-1Q15) Source: Company data, RHB Source: Company data, RHB Financial outlook Following the weak 1Q15 results, we cut our sector full-year core profit growth forecast to 8% YoY from 18%, to reflect lower-than expected margins and topline. The sector bottomline, on the other hand, is likely to slip 3% YoY, from +5% as per the previous forecast. We note that 48% of 2015 sector revenue is secured by a combined backlog of THB185bn at end-2014. Going into 2016, we estimate net profit to grow 15% YoY. We expect LPN Development, Quality Houses, Sansiri and AP Thailand to register double-digit recurring profit growth this year. The downside risk would be more to the topline, which is highly linked to GDP growth and the cancellation/rejection rates of projects. The earnings upside this year would be the potential asset monetisation via REITs. Sector rating: NEUTRAL Following the recent market correction, the sector’s trailing P/E has dipped to -0.5SD from the mean. The downside from this level seems limited, in our view. We highlight that since the US financial crisis in 2008, the sector’s P/E had hit the -1SD level only three times – during the Red Shirts riot in May 2010, floods at end-2011 and protests against former Prime Minister Yingluck Shinawatra at end-2013. Although we remain bullish on AP Thailand, we also see value in Pruksa and Quality Houses, which are now trading at -1SD level from the mean. Any signs of an economic recovery or the start-up of public investment in 2H15 would be positive for Pruksa, a leader in the mid- to low-end segment. Other developers that also trade below their mean P/Es include AP Thailand, Quality Houses and LPN Development. We are less upbeat on large-cap developers. According to their 2015 guidance, earnings prospects for large-cap developers and mid- to low-end developers such as Land and Houses, Pruksa, Supalai and LPN Development look unexciting as they have been hit by weak demand, lower margins and high rejection/cancellation rates. We are, however, bullish on mid-range to high-end developers such as AP Thailand and Sansiri, which have room to improve efficiency. Sansiri is set to bounce back this year, after it underwent a restructuring of its business and finances last year. These two companies build projects aimed at the mid-range to high-end segments and their guidance for presales and new launches is more aggressive than the industry average. Figure 77: Residential property sector’s P/E and SD levels Source: Setsmart, RHB See important disclosures at the end of this report 43 ASEAN Real Estate 29 June 2015 Malaysia – Lacks Near-Term Re-Rating Catalysts Loong Kok Wen, CFA Still troubled by impact of GST implementation and cooling measures +603 9207 7614 We expect the sector to take another 3-6 months to recover after the implementation of the GST in Apr 2015. After the GST kicked in, consumer spending has been slow, [email protected] largely due to the “feeling” of inflationary pressure. Many buyers and developers have continued to remain on the sidelines and adopt a wait-and-see attitude as market sentiment has been weak. While the Klang Valley and Penang markets are still somewhat resilient, the Iskandar Malaysia market remains very challenging due to heightening concerns over oversupply. Demand has almost dried up, based on the take-up rates of only 20-30% for many new launches in Johor. In 1Q15, new property sales of the developers under our coverage were down by 15-20% QoQ and flat YoY on average, while there was a dearth of new launches up to June. Given the remaining 6-month window, we doubt that developers would be able to secure substantial sales as the recovery in demand would likely be moderate. In addition, in line with the Central Bank’s prudent lending guidelines, the commercial banks continue to restrict mortgage lending as credit assessments are tightened. The attrition rate for mortgage approvals has been high since 2014 and some developers cited that the loan rejection rates could be as high as 50%. As a result, conversion of bookings into contract sales is also taking longer with 6-9 months currently vs just three months in the past. We, therefore, expect average new sales for the developers under our coverage to fall by 10-20% from -27% in 2014. Figure 78: Expect another 10-20% drop in new sales in 2015 MYRm 25,000 50% 41.1% 40% 20,000 24.7% 30% 20% 15,000 10% 0% 10,000 -10% -20% 5,000 -27.5% -30% 0 -40% 2011 2012 2013 2014 Source: Company data, RHB Gradual demand recovery in late 2015/2016 Looking ahead, we expect demand for properties to recover in late 2015 or early 2016. According to our analysis based on GDP growth and the historical population growth cycle, the property market is expected to pick up next year, but the rebound may not be that robust – given our GDP growth forecast of only 5.5% next year vs 5.0% in 2015. The sector has been sluggish since 2H14, and the expected timing of recovery, ie 2016, may seem slightly longer this round (almost two years vs one year historically), but we think this is reasonable, considering the additional impact from the GST implementation and the period needed for the economy to digest the new tax. Apart from the slightly better economic growth, other potential positive factors may include less stringent mortgage lending requirements, the loosening of selective cooling measures, and restoration of market confidence and sentiment as people slowly adapt to the GST regime in their spending habits. See important disclosures at the end of this report 44 ASEAN Real Estate 29 June 2015 Figure 79: Projected property cycle based on economic (GDP) Figure 80: Projected property cycle based on population growth growth 50% 12% 20% 20% 40% 10% 15% 15% 30% 8% 5.5%6% 20% 5.0% 4% 10% 10% 10% 2% 0% 5% 5% 0% 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 -10% 1991 -2% -20% 0% 0% -4% 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 -30% -6% 1991 -5% -5% -40% -8% -50% -10% Commercial (LHS) Residential (LHS) GDP grow th (RHS) -10% -10% Population aged 15-64 (lagged data) Average Residential Property Price (RHS) Source: NAPIC, RHB Source: DOS, NAPIC, RHB Kuala Lumpur-Singapore HSR a potential boost to urban properties While the near-term story is unexciting, from a longer-term perspective, the proposed Kuala Lumpur-Singapore HSR project could be a strong catalyst to the real estate within the Klang Valley, particularly the properties in the city centre. Upon its completion in 2020, the HSR will take only 90 minutes to reach Singapore from Kuala Lumpur (and vice versa). Coupled with the MRT network (Lines 1 & 2, and the city circle line), the completion of both rail networks would significantly enhance connectivity in the southern part of West Malaysia. We view this as a new growth driver for the high-end high-rise properties in Kuala Lumpur city and Mont Kiara, given the substantial price difference between the city state and the city centre when travelling time is shortened significantly. Similarly, the commercial properties (including retail malls, offices and hotels) should also benefit in the future as traffic flow increases. Currently, both the Malaysia and Singapore Governments are discussing various aspects of the project, such as the design, financing, governance, operations, immigration requirements, etc – and we believe more updates will likely be made at year-end. According to the Land Public Transport Commission chairman Tan Sri Syed Hamid Albar, two services would be offered – one non-stop and the other with transits. Five stops have already been identified: Seremban, Melaka, Muar, Batu Pahat and Nusajaya. Iskandar Malaysia, instead, is set to benefit from the Johor-Singapore Rapid Transit System (RTS). The link is targeted for completion in 2018/2019. While Singapore has announced the RTS terminus to be located at Woodlands North near Republic Polytechnic, we expect the Malaysian Government to finalise its decision on the terminus location soon, so that both parties can proceed to the next step. As the Iskandar Malaysia region has seen massive oversupply issue, we believe physical progress on the RTS link will help to improve the situation to a certain extent. Figure 81: Five HSR stops in between KUALA LUMPUR and Singapore Source: SPAD See important disclosures at the end of this report 45 ASEAN Real Estate 29 June 2015 Sector rating: NEUTRAL Although the sector is already trading at a 47% discount to RNAV, further downside is still possible if the GST impact on the economy and consumer spending is greater than expected. Near-term re-rating catalysts are lacking. Concerns on issues related to a government-linked company, political and currency risks are very much the key setbacks for the country at the moment. Nevertheless, as these issues are resolved over time, we expect a potential re-rating in late 2015, in tandem with a gradual recovery in the Malaysian property market, underpinned by stable economic growth and an uptick in the population cycle. For now, we prefer developers with ongoing corporate exercises such as Sunway, due to its special cash dividend post listing of Sunway Construction in 3Q. We also like affordable housing players with a strong balance sheet, such as Matrix Concepts and Tambun Indah. Given the resilient demand and consistent cash flow from their township developments, these developers would be able to sustain their 5-6% dividend yields. We recently upgraded Paramount, given its earnings turnaround story from both property development and education divisions. Potential asset monetisation could be on the cards as well, given its funding commitment for landbanking and the construction of a new campus at Batu Kawan, Penang. Figure 82: Current valuations of Malaysia property sector 0% Feb-12 Feb-13 Feb-14 Feb-15 Nov-11 Nov-12 Nov-13 Nov-14 May-12 Aug-12 May-13 Aug-13 May-14 Aug-14 May-15 -10% Aug-11 -20% -30% -40% -50% -60% -70% Discount to RNAV Mean +1 stdev -1 stdev +2 stdev -2 stdev Source: Bloomberg, RHB See important disclosures at the end of this report 46 ASEAN Real Estate 29 June 2015 Singapore – Policy Stance Depends On Election Results A 3-party catch-22 situation to persist for rest of the year Ong Kian Lin +65 6232 3895 As of 31 Mar 2015, new home sales registered only 1,697 (including executive condominiums (ECs)) and 1,369 (ex-ECs), down 12.6% and 23.6% YoY respectively. [email protected] We reiterate that the 3-party catch-22 situation amongst homebuyers, developers and authorities could still persist. Homebuyers are holding back in anticipation of the surge in physical completions in 2015-2016 and prospective price declines. Developers are dragging launches, with an eye on the Government stepping in to reverse some anti-speculation measures. From the authorities’ perspective, without a significant drop in property prices, it would be difficult to justify any easing of cooling measures, when prices in general are only slightly off their peaks in 3Q13 (down 5.9%). We think the lifeless property market seen last year is likely to persist into 2015. We project new homes sales (including ECs) to hit 6,000-9,000 units and that of ECs to be at below 2,000 units. Property prices are forecasted to drop 6-10% pa in 2015. It has, so far, dipped by 3.9% YoY as of 1Q15. We are still most downbeat on the CCR (high-end) segment, followed by RCR (mid-tier) and we expect the mass-market segment to stay most resilient this year. So long as the resident unemployment rate stays low (Mar 2015: 2.5%) and home owners can continue to finance their mortgage loans, we do not expect drastic property fire sales in this segment of the market. Cooling measures unlikely to be lifted this year Contrary to the street, we think Singapore’s property cooling measures are unlikely to be lifted this year, because: i. 2015 could possibly be an election year. A relaxation of cooling measures would be unlikely, as it may result in a property price spike overnight at property launches – this is not aligned with the Government’s intention. ii. The Feb 2015 property tightening by Hong Kong Monetary Authority (HKMA) rang a warning bell to the Monetary Authority of Singapore (MAS) to be more stringent when relaxing measures with: Lowering the maximum LTV limits by 10ppts for self-use residential below HKD7m to 60% from 70%. Lowering the debt-servicing ratio (DSR) by 10ppts on second self-use residential to 40% from 50% Lower DSR by 10ppts on non self-use property (including residential, commercial, industrial, car park spaces) to 40% from 50% Banks adopting the risk-weight floor to 15% for new residential mortgage loans (RMLs) by end-Jun 2016 and to 10% for these RMLs by end Jun 2015. iii. Singapore’s Ministry of National Development (MND) is behaving like the US Fed and turning data-dependent. It has openly stated that the cooling measures will lift off only when property prices have corrected meaningfully. So far, the island-wide price index was down only 4% last year and 5.9% from the peak, which is nowhere near our assumed 10-20% "meaningful" target. Some houses took "Minister Khaw seeks 'soft landing' for housing market' in a recent Business Times article as an indication that the Singapore Government may be relaxing measures soon. We adopt a contrarian view, and believe that the relaxation of measures may not happen soon, or even in 2015 for that matter. See important disclosures at the end of this report 47 ASEAN Real Estate 29 June 2015 Elections – a wild card for property As for the impact on property prices, we think this mainly depends on the upcoming election results. If Prime Minister Lee Hsien Loong achieves below the People’s Action Party (PAP) mandate of 60.1% achieved in the last election (7 May 2011), he may favour more social policies – which means that cooling measures may not be lifted so soon. Immigrants and permanent residents may also continue to be tightly controlled. If the Prime Minister (and the PAP) wins a landslide victory – possibly matching or above his 66.6% maiden election in 6 May 2006 – we think there may be more pro-business polices implemented. This could include the lifting of cooling measures and loosening of immigration regulations to fill the upcoming supply of residential/office/retail/industrial space. Figure 83: Singapore general elections (1980-2011) and votes won by PAP Source: Wiki Household leverage in the pink of health We see no systemic risk to the housing market as ceteris paribus, the value of residential property would have to drop by more than one-third (c.36%) before household leverage revisits its 20% mark – ie the previous highs in 2000-2004. We believe this is a remote case. Total inventory of unsold units (ex-ECs) still manageable Compared to 2000’s high (over 50,000 unsold units, or 28% of available stock), the 33,519 unsold units or 11% of available stock (including those in the pipeline supply without pre-requisites for sale) in 1Q15 appear manageable. Following the enforcement of Singapore’s property cooling measures, we noted that many developers have been more cautious in replenishing their landbanks since 2011. This resulted in the steady decline of unsold pipeline supply, especially those without pre- requisites for sale, over the past three years. From a peak proportion of 80% in 2007, the proportion of pipeline supply without pre- requisites for sale dropped to a modest 35% of available stock in 1Q15, reflecting that developers are keeping residential land bids in check amid cautious sentiment. See important disclosures at the end of this report 48 ASEAN Real Estate 29 June 2015 Figure 84: Total unsold inventory including pipeline supply without pre- requisites for sale Title: 55,000 30.0% Source: 28.0% 50,000 26.0% Please fill in the values above to have them entered in your report 24.0% 45,000 22.0% 20.0% 40,000 18.0% 16.0% 35,000 14.0% 12.0% 30,000 10.0% 01 01 02 03 04 04 05 06 06 08 08 09 10 11 11 13 13 15 00 00 02 03 05 07 07 09 10 12 12 14 14 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 1 3 1 3 1 3 3 1 3 1 3 1 3 1 3 1 3 1 1 3 3 1 1 1 3 3 1 1 3 1 3 Total unsold inventory incl. pipeline supply w/o Pre-requisites for sale % of avail. stock [RHS ] Source: URA Figure 85: Breakdown of total unsold inventory (including pipeline supply without pre-requisite for sale) % % % % Title: % % 3 % 2 3 55,000 3 % % % 3 3 3 % % % % 3 2 2 % Source: % % 2 3 2 1 % % % % 3 % 2 % % 50,000 2 % % % 2 6 6 % % 9 % % % 1 2 % % % % 2 % % 9 % 5 11 1 9 1 % % 2 2 4 % 10 1 % 4 % % 6 % % % 10 45,000 % 11 % % % % % 7 2 1 % % % % % Please fill in the values above to have them entered in your report % % 4 1 % % % 3 % 12 % 3 9 14 % % 2 11 2 5 % % 4 % 1 6 4 9 % % 11 % % 4 4 3 8 % % 6 % % 2 % % % 3 8 6 3 4 % 1 % % 8 3 8 40,000 % 13 2 % 3 % 4 4 2 % % % 5 % % % 5 4 % % 4 % 13 % 8 12 % % % % % % 7 4 6 % % 8 % % 9 13 % % % % 12 % % 12 % 9 7 35,000 12 % 11 10 12 % 8 % 12 6 11 10 13 7 9 8 % 12 12 16 16 14 % % % % % 10 % 17 12 % % % % % 30,000 % 18 % % % % % % % 16 17 % % 70 71 66 61 % % % % 65 67 73 % 17 69 62 % % 58 70 % % 59 60 68 % 69 58 25,000 % 63 % % 80 % % % % 68 % 63 % 66 % % 64 % % % % % 69 % % % % % 60 % 57 % 80 % % 65 % % % 63 % 68 % % 58 76 % % 58 66 56 61 63 61 59 59 54 57 66 20,000 62 43 57 51 69 72 62 53 43 58 67 73 69 72 35 45 64 47 15,000 61 10,000 % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % 32 % 33 % % % 41 37 % 26 5,000 % 36 27 25 32 26 27 25 34 22 26 22 26 30 29 28 21 27 25 20 31 28 27 26 27 28 22 27 20 19 25 25 20 21 23 19 24 25 19 26 24 22 19 23 21 20 22 22 21 17 19 20 15 19 17 15 0 16 With Pre-req but not yet launched Without Pre-req With Pre-req, Launched but Unsold Completed but Unsold Source: URA If we exclude those units without pre-requisites for sale, the number would fall to 21,675, with the most units in the OCR (44%), followed by CCR (31%) and RCR (25%). As a proportion of available stock, unsold inventory as of 1Q15 remains at a modest 7%, which is still manageable in our view. See important disclosures at the end of this report 49 ASEAN Real Estate 29 June 2015 Figure 86: Total unsold inventory with pre-requisites for sale Title: 25,000 9.0 Source: 8.0 20,000 Please fill in the values above to have them entered in your report % % % 25 % % 29 % % % 28 % % % 7.0 % 24 27 24 27 22 27 21 % % 29 15,000 26 % % % % % % % % % 22 29 % % 23 27 31 % 28 % 26 23 23 22 6.0 % % 25 % 30 % % % 24 % % % % 32 % % 27 % 33 % % % 44 % % % 38 % % 36 38 29 % 40 % % % 10,000 26 38 % 41 % 38 42 % 36 37 % % 27 24 35 % % 27 % 25 24 % 18 % 28 % 34 24 24 5.0 33 35 24 % 37 32 23 28 39 33 20 % 30 % % % 24 % % 25 45 42 % 43 5,000 % % % % % 22 % % % 30 % % % % % % % % % % % % 4.0 % % % % % % % % 46 44 % 47 50 48 % 51 49 45 38 34 34 36 % 43 37 % 38 36 31 43 37 % 36 % 44 47 45 42 45 37 35 40 38 51 48 37 38 30 0 31 3.0 07 07 08 08 09 10 10 11 11 12 13 14 14 06 06 07 07 08 08 09 09 09 10 10 11 11 12 12 12 13 13 13 14 14 15 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 1 2 3 4 4 1 2 2 3 4 1 2 3 3 4 3 4 1 2 1 2 3 3 4 1 4 1 2 3 2 3 4 1 4 1 CCR unsold inventory OCR unsold inventory RCR unsold inventory % of avail. stock [RHS ] Source: URA Sector rating: NEUTRAL Valuations of Singapore property developers seem to be rather moderate as the FTSE Singapore Real Estate Developers Index is currently trading at P/BV of 0.81x, not too far away from its average of 0.87x. On a RNAV basis, developers under our coverage are trading at 25-35% discounts, which are also on par with average. Likewise, if we use the price-to-EBITDA valuation methodology, the sector still looks fairly valued as it is currently trading at a forward price/EBITDA of 11.8x, near its historical average of 11.1x. Given the limited catalysts in the Singapore property market, we think valuations are not compelling since the sector is trading near its averages. We believe that the 3-party Catch-22 situation amongst homebuyers, developers and authorities may still persist, which could lead to a 6-10% pa drop in island-wide property prices for the remaining 2015. Homebuyers are holding back in anticipation of the surge in physical completions in 2015-2016 (46,000 private homes to be completed over the next two years) and prospective price declines. Some developers are dragging launches, with an eye on the Government potentially stepping in to reverse some of its anti-speculation measures. From the authorities’ perspective, without a significant drop in property prices, it will be difficult to justify any easing of cooling measures, when prices are only 5.9% off their peaks in 3Q13. We maintain our NEUTRAL rating on the Singapore real estate sector. CapitaLand is our Top Pick. With the privatisation of Keppel Land by Keppel Corp, we have removed the former stock and selected CapitaLand as our Top Pick, which is also regionally diversified and has a mere 9% FY15 RNAV exposure to the Singaporean residential sub-sector, but a higher proportion of exposure to retail/office/mixed developments instead. See important disclosures at the end of this report 50 ASEAN Real Estate 29 June 2015 Top Picks AP Thailand (AP TB, BUY, TP: THB8.35) Best performer in 1Q15. This was in terms of topline, and presales and earnings growth. Margins have also been resilient. Momentum continues to be strong with new launches worth THB17.8bn in 2Q15 and THB12.7bn in 3Q15. Successfully restructured and improved its business in 2014. Its guidance for presales and new launches in 2015 is encouraging. Hidden value in projects waiting for re-development. These include Sk39, Ngamwongwan and Sathorn. Sansiri (SIRI TB, BUY, TP: THB2.30) Meaningful earnings turnaround in 2014. This was after restructuring its finances (its net gearing is now at 1.5x) and business. Strong brand, large backlog worth THB40bn. It has room to improve its net margins, which are currently below the industry average. Recently signed seven new partnership deals with the BTS Group. This is in order to develop residential projects over the next few years. Cut its margins to boost sales in 1Q15, while cleaning up balance sheet and divesting assets to improve cash flow. 2Q15 performance is likely to improve strongly YoY and QoQ with more new launches. Pruksa Real Estate (PS TB, BUY, TP: THB31.30) Market leader by presales, new launches and revenue. 1Q15 results were unexciting as it cut margins to boost presales and clear inventories. 4M15 presales growth remains healthy at 50% YoY. Developers targeting the mid-range to low-end segment have been hit hard by a sluggish economy and weak consumer confidence in 1H15. Its P/E has dropped to 1SD below its long-term mean. At current valuations, Pruksa is worth another look. Any sign of an economic recovery spells good news for mid-range to low-end developers, and a market leader like Pruksa is likely to be a prime beneficiary. Bumi Serpong Damai (BSDE IJ, BUY, TP: IDR2,400) Sufficient landbank. We like the company’s outstanding landbank of more than 3,000ha in the Serpong area, as this gives it the flexibility to sell or launch products according to changes in market conditions and enable it to focus on maximising potential asset value. Potential growth in second-tier cities. The company has plans to grow its market outside Java, and is set to start rolling out residential projects in Samarinda, targeting IDR100bn in sales for FY15. It is growing recurring income. This could mitigate earnings volatility, given the cyclical nature of Indonesia’s property sector. Summarecon Agung (SMRA IJ, BUY, TP: IDR2,000) Good recurring income. Around 30% of revenue is recurring, which grew at 18% CAGR in FY09-13, thereby creating greater earnings stability. Future catalyst in the pipeline. The company will develop two new township projects in Bandung and Bogor. It is also looking to expand its business portfolio to Sumatera and Central Java for more urban developments. Further unlocking of value. This is via the listing its investment (recurring) property assets. See important disclosures at the end of this report 51 ASEAN Real Estate 29 June 2015 Company Highlights Company Products Main Target group Geographical exposure Description Outlook/Strategy Indonesia Alam Sutera Realty Townships (residential, Mid to mid-high segments Mainly in Serpong, Tangerang, Jakarta The pioneer in township Management will manage its cash flow by commercial, apartment, and Bali development in Serpong and selling commercial land lots in Serpong and office), Cultural Park Tangerang. It owns more than there will be more commercial property GWK (including hotel and 2,200ha of landbank in various launches in Suvarna Sutera (Pasar Kemis) to resorts) locations for future development. attract buyers. It has recently signed an MoU Currently, its main development is with an Asian-based property developer to in Alam Sutera, Serpong, and it is form a JV and co-develop a superblock expected to continue with its project on a 20ha plot of land in Serpong. The success story for its second transaction is expected to generate potential development in Suvarna Padi, sales value of IDR4.6trn Pasar Kemis. In addition to its property development, Alam Sutera Realty also owns two CBD office blocks in Jakarta and GWK in Bali - its future source of recurring income Lippo Karawaci Townships (residential, Mid to mid-high segments Projects are mainly located in Jakarta and A property company with an Value enhancement of its landbank via commercial, apartment Greater Jakarta, although a few are integrated business model with the various new infrastructure development and and office), hospitals, scattered in Sumatera, Kalimantan, ability to recycle capital through high quality residential and commercial REIT management, hotels Sulawesi and Kupang REITs. It has a diversified products. Efforts will be made to continue to and retail malls landbank across Indonesia improve operational and cost efficiencies to shorten the stabilisation period for new hospitals, expedite the development of malls in the pipeline and grow its REITs through its asset light strategy Bumi Serpong Damai Townships (residential, Mid to mid-high segments Mainly in Greater Jakarta (Serpong), The company owns the largest The company will continue with its commercial, apartment although a few are scattered in Jakarta, licensed area of 5,950ha in the landbanking activities despite its large and office), hotels and Bekasi, Medan, Balikpapan and Surabaya prime and fast-growing area of landbank in BSD city, and expand its retail malls Serpong. It receives recurring business throughout second-tier cities income from its offices, hotels and outside Java while improving its recurring- commercial superblocks in Greater based income Jakarta, Balikpapan and Surabaya. Ciputra Surya Townships (residential, Mid to mid-up segments Mainly in West Surabaya, and numerous A pioneer of township Continue to enhance its land value in West commercial, apartment, joint operations (JO) projects throughout development in West Surabaya. Surabaya (Citraland Surabaya and North office), hotels, retail malls Indonesia The company owns 460ha Citraland) while expanding its property landbank in Surabaya and is business through JOs in the property market expanding aggressively in the outside the city property market outside the city through JO Ciputra Development Townships (residential, Mid to mid-up segments Mainly in Greater Jakarta, with numerous Ciputra has more than 20 years’ Continue to enhanced its direct-owned commercial, apartment, JO projects througout Indonesia experience in the property sector. project value while expanding its property office), hotels, retail malls The company is the largest and business aggresively throughout Indonesia most diversified property company through JO by project throughout Indonesia Summarecon Agung Townships (residential, Mid to mid-up segments Jakarta, Serpong, Bekasi, and future Summarecon Agung, a developer Launching a fourth township in Bandung and commercial, apartment projects in Bogor and Bandung that has successfully transformed will continue to improve its recurring-based and office), hotels and the Kelapa Gading area from income with the completion of Movenpick retail malls unproductive swamp land into an Hotel Bali integrated residential and commercial township, is set to capitalise on the huge potential of Indonesia’s property market Agung Podomoro Land Mixed use high-rise Mid to mid-high segments Second tier cities throughout indonesia Agung Podomoro Land is one of "Fast churn" strategy, whereby the company development the leading integrated diversified has been aggressively expanding its real estate owners. It is also a business through stake acquisitions of developer and manager in the projects in second tier cities. retail, commercial and residential estate segments with diversified holdings. Known as the pioneer of the superblock development, its high-quality landmark projects include Podomoro City, Kuningan City and Senayan City Source: Company, RHB See important disclosures at the end of this report 52 ASEAN Real Estate 29 June 2015 Company Products Main Target group Geographical exposure Description Outlook/Strategy Initland Development Mixed use high-rise Mid to mid-high segments Jakarta and Surabaya Intiland Development has a track Continues to focus on developing exisiting development and some record of more than 40 years as a projects in Jakarta and Surabaya. It also landed residential projects property developer in Indonesia. maintains its acquisition strategy and will The company has developed over strengthen the company's position via 40 projects with total developed strategic partnerships area of approximately 1,360ha. Its core portfolio include mixed-use and high-rise, townships and estates, as well as industrial. It has also ventured into the hospitality industry via its own hotel chain, Whiz Hotel Surya Semesta Internusa Construction, industrial - Greater Jakarta (Karawang and West Surya Semesta Internusa and its Improved profitability from industrial land land, office and hospitality Java) subsidiaries develop and manage sales, as problems arising from land claims industrial and residential real have been sorted out. Construction will estates, as well as provide remain its biggest revenue contributor, while construction services and its recurring revenue base from investments operating hotels in toll roads and warehouse & factories will expand Bekasi Fajar Industrial land, - Greater Jakarta (Cibitung and Bekasi) Bekasi Fajar, a leading industrial Company is targeting 15-20ha industrial land warehouses, SFBs, hotels estate developer, is part of Argo sales which is lower than their initial target of and offices Manunggal Group. Since its 40ha. Currently, potential industrial buyers establishment in 1989, the are having "wait-and-see" attitude given the company has partnered with Japan-weakening JPY and IDR currency, coupled based Marubeni Corporation to with uncertainty in economic policy. develop an industrial city called MM2100. Lippo Cikarang Industrial land integrated - Greater Jakarta (Cikarang) An independent township To maintain sustainable growth, the company with townships developer with a solid industrial is shifting its current focus to superblock sector as its economic pillar. Its projects, such as "Orange County", which will unrivalled quality infrastructure and cater for demand in the eastern coridor diversed facilities should support (Jakarta to Bandung) its strategy in sustaining growth, moving forward Thailand Ananda Development Condo, SDH Mid- to high-end Bangkok Bangkok Focus on condominium along Targets to rank first for condo presales in Bangkok's mass transit stations 2015, up from second in 2014, with the partnership of Mitsui Fudosan AP Thailand TH, SDH, Condo Mid- to high-end Bangkok Bangkok Caught the early upcycle of city It made a strong comeback in 2014 after condominiums, but got into quality implementing an efficient cost control control issues several years ago programme and via a JV with Mitsubishi Estate Land and Houses TH, SDH, Condo Mid -to high-end 85% Bangkok, 15% major cities Losing its market share in a big Turning to focus more on rental property, way to condo developers which will later be monetised via REITs LPN Development Condo, TH Low-end 80% Bangkok, 20% major cities Riding on popularity of Focus on steady top line and presales growth condominiums, with a strong niche of 10-15% pa in the super low-end market PACE Condo High-end and luxurious Bangkok and Hua Hin Focuses on the luxurious Building upa diversified business portfolio residential segment, targeting with high end property development, stylish wealthy Thais and foreigners hospitality and retail properties Pruksa Real Estate TH, SDH, Condo Mid- to low-end 95% Bangkok, 5% upcountry Gaining market share via Maintains its leadership in the residential aggressive expansion from low- property sector in terms of topline, presales end townhouse development into and new launches well-diversified product segment Quality Houses TH, SDH, Condo Mid- to high-end 75% Bangkok, 25% eastern seaboard and Successful diversification from the Gained momentum on sales while gross major cities high end segment into the mid to margins have gradually improved from 27- low market 28% to the current 33% over the past several years. SC Asset Corp TH, SDH, Condo High-end 85% Bangkok, 15% tourist areas Done well on its core business, but Re-rating to trade at higher P/E on the back SC Asset Copr - under the of proven track record and easing of political Shinawatra family - faces possible risk political risks Sansiri TH, SDH, Condo Every segment from low- 65% Bangkok, 35% upcountry Took almost 10 years to build its 2014 was the year of financial engineering to high-end brand and transform into a well- and business restructuring. It is now ready to diversified property developer and make a comeback with improved efficiency market leader in 2012-2013. Got ratios, new partnership with BTS skytrain and caught in financial problems two manageable net gearing years ago given its aggressive management style Supalai TH, SDH, Condo Mid- to low-end 60% Bangkok, 40% upcountry Highest exposure to the upcountry Turning slightly more aggressive with the market. Conservative in terms of younger generation management team. management style, product However, weak upcountry market is putting design, conventional construction pressure on its performance. technique and financial management Source: Company, RHB See important disclosures at the end of this report 53 ASEAN Real Estate 29 June 2015 Company Products Main Target group Geographical exposure Description Outlook/Strategy Malaysia UEM Sunrise All Mid- to high-end Mainly in Iskandar 66.1% owned by Khazanah Venturing out of Malaysia, and new projects Nasional. It is a proxy to Iskandar in Melbourne managed to garner strong Malaysia due to its large landbank interest. Locally, focus will be on landed exposure there housing SP Setia All Mid- to high-end In major cities of Malaysia 68.2% owned by PNB. Leadership Focusing on mass segment and landed has been an issue since the housing. Market expects some restructuring departure of its former CEO exercises to be carried out IOIPG All Mid- to high-end Klang Valley, Johor and Xiamen, China Listed in Jan 2014, a spin-off from Focusing on mass segment and landed IOI Corp. The developer is known housing. It is also building up its recurring for its proposed acquisition of 37% income base with the recent opening of IOI stake in Taipei 101, but the deal City Mall and the completion of over was subsequently aborted due to commercial assets in Singapore various objections Sunway All Mid- to high-end In major cities of Malaysia An integrated property developer Focusing on projects near transit hub that has property development, (Velocity) and within matured areas (Bandar property investment, construction, Sunway) trading & quarry, and healthcare divisions. Bandar Sunway is its flagship project, which is transformed from mining land Mah Sing All Mid- to high-end In major cities of Malaysia An entrepreneur-run property Focusing on mass segment and landed company with the most ambitious housing sales target of MYR3.43bn for 2015 UOA Development High-rise residential and Mid- to high-end Klang Valley A Klang Valley based developer Scaling back launches in 2015, with key commercial specialising in high-rise projects still within 25km radius from the city commercial and residential centre. Its Jalan Ipoh land will beneift from developments. Its flagship project MRT2 is called Bangsar South E&O High-rise residential Luxury segment Mainly in Penang A Penang-based developer, with Planning to list its London developments in Sime Darby holding a major 22% the UK to deconsolidate the debt and balance stake in the company sheet Matrix Concepts Township Affodable housing Mainly in Seremban An affordable housing player with Exploring more opportunities in the Klang anchor residential and industrial Valley or outside Malaysia projects in Seremban. Bandar Sri Sendayan is its flagship township. Tambun Indah Land Township Affodable housing Penang mainland An affordable housing player Looking to buy more landbank or form JV for based in Seberang Perai, more developments in Mainland Penang strategically benefiting from the and/or the Klang Valley catalytic investments in Batu Kawan. Pearl City is its flagship project Paramount Education township Mid- to high-end Klang Valley and Penang mainland A defensive property stock due to Earnings turnaround with potential value- its 30% earnings contribution from unlocking exercise to raise fund for expansion education segment opportunities Hua Yang Mainly high-rise Affodable housing Klang Valley, Perak and Johor An affordable housing player but Landbanking is typically in tier-2 cities so that residential mainly on the high-rise segment. land cost is manageable to maintain profit Unit pricing for most projects is margins kept below MYR500,000 mark Glomac Township and high-rise Mid- to high-end Klang Valley A developer with a combination of Sales were severely hit by the current weak township development and high- market. Focus will be on landed housing and rise projects in Sungai Buloh, its new Saujana KLIA project. Puchong, Damansara and Dengkil MRCB High-rise residential and Mid- to high-end Klang Valley MRCB is known for its KL Sentral New management team came on board at commercial integrated transportation hub end-2013. Expansion has been aggressive development. It has developed via successful bid for MX-1 Kwasa Land and various office and residential the German Embassy land recently buildings in the area, which are well tenanted Source: Company, RHB See important disclosures at the end of this report 54 ASEAN Real Estate 29 June 2015 Company Products Main Target group Geographical exposure Description Outlook/Strategy Singapore City Developments All Mass market to high-end Global, mainly Singapore. Second-largest developer in South- Greater diversification outside Singapore. East Asia, with strong global Further setting up of private funds and REITs presence in 20 countries. City to uplift ROE Developments is widely diversed across residential, hospitality and industrials properties CapitaLand All Mass market to high-end Global, mainly Singapore and China. One of Asia’s largest real estate Growth drivers from its 32% investment companies, with strong corporate properties that are still under development or branding not yet stabilised and future strata sales of existing properties. More investments in growth markets such as Vietnam, Indonesia and Malaysia SingHaiyi Residential, Commercial Mass market to high-end Singapore, USA A distressed asset player in the Exploring more opportunites to beef up US, with strong support from its exposure in the US. Monetising its Singapore sponsor's (American Pacfific inventory in 2015-2016 will free up cashflows International Capital) pipeline of for further US expansion US and China assets spanning hotels and retail spaces too Oxley Residential, Commercial Mid- to high-end Singapore, London & Cambodia A lifestyle property developer Exploring opportunities overseas engaged in all segments of the real estate market, from residential to commercial and industrial developments Sinarmas All Mass market to high-end Global, mainly Indonesia Largest and most diversified Unlocking value from legacy overseas assets property developer in Indonesia and expanding international footprint through with a growing international stepping up investments overseas portfolio. Huge landbank in Greater Jakarta, Indonesia, acquired at a low cost with healthy margins Source: Company, RHB See important disclosures at the end of this report 55 ASEAN Real Estate 29 June 2015 Company Bloomberg Market Rating Price TP Core P/Es Core P/Es EPS P/BV Net gearing Dividend ROE RNAV Prem/disc to ticker cap (local $) (local $) FY15 (x) FY16 (x) growth FY15 FY15 yield FY15 (local $) RNAV (USDm) FY15 FY15 REAL ESTATE Malaysia Eastern & Oriental EAST MK 539.8 Neutral 1.66 2.02 39.62 26.16 -43.3% 1.41 58% 2.3% 9.9% 4.03 -50% Glomac GLMC MK 152.1 Sell 0.785 0.88 9.19 6.81 -42.5% 0.62 15% 7.2% 9.0% 1.96 -55% Hua Yang HYB MK 137.2 Buy 1.95 2.52 4.66 4.47 14.9% 1.11 45% 6.7% 26.0% 3.36 -25% IOI Properties Group IOIPG MK 1,909.1 Neutral 1.9 2.25 14.23 13.48 1.7% 0.56 12% 4.2% 3.9% 4.49 -50% Mah Sing MSGB MK 1,075.2 Neutral 1.68 2.18 9.94 9.94 -26.5% 1.06 10% 4.5% 12.9% 2.91 -25% Malaysian Resources Corp MRC MK 585.8 Neutral 1.23 1.31 27.15 21.85 78.6% 1.07 137% 2.0% 4.0% 2.03 -35% Matrix Concepts Holdings MCH MK 392.2 Buy 3.18 3.65 7.03 6.54 13.3% 1.81 -10% 5.8% 27.9% 4.29 -15% Paramount Corp PAR MK 213.9 Buy 1.90 2.40 10.83 10.16 25.4% 0.90 33% 4.2% 8.5% 3.00 -20% SP Setia SPSB MK 2,290.9 Buy 3.32 4.08 12.87 14.74 75.5% 1.37 49% 2.9% 10.9% 4.54 -10% Sunway SWB MK 1,593.9 Buy 3.39 4.10 10.03 10.11 -1.5% 0.93 30% 3.2% 9.6% 5.66 -40% Tambun Indah Land TILB MK 187.0 Buy 1.66 2.28 6.13 5.51 11.6% 1.49 -1% 5.4% 26.4% 2.68 -15% UEM Sunrise UEMS MK 1,246.0 Neutral 1.03 1.26 11.03 11.59 -13.9% 0.69 11% 2.9% 6.4% 3.15 -60% UOA Development UOAD MK 789.7 Neutral 2.07 2.45 9.64 10.28 -6.2% 1.04 -19% 6.3% 11.1% 4.08 -40% Malaysia average 13.26 11.67 6.7% 1.08 29% 4.4% 12.8% Singapore CapitaLand CAPL SP 10,557.5 Buy 3.33 4.20 17.00 14.52 -26.3% 0.82 45% 0.0% 4.9% 5.59 -40% City Developments CIT SP 6,478.1 Neutral 9.59 10.20 13.31 14.01 -10.7% 1.00 35% 0.0% 7.8% 13.60 -29% SingHaiyi Group SHG SP 280.8 Buy 0.13 0.18 17.87 6.55 -8.6% 0.85 81% 0.0% 4.9% 0.27 -51% Sinarmas Land SML SP 1,457.6 Buy 0.65 1.01 16.53 15.87 7.2% 1.66 -17% 0.9% 10.5% 1.01 -36% Oxley Holdings OHL SP 1,029.4 Buy 0.47 0.91 12.37 7.14 -57.3% 2.38 168% 0.0% 23.4% 1.14 -59% Singapore average 15.42 11.62 -19.1% 1.34 62% 0.2% 10.3% See important disclosures at the end of this report 56 ASEAN Real Estate 29 June 2015 Company Bloomber Market Rating Price TP Core P/Es Core P/Es EPS P/BV Net gearing Dividend ROE FY15 RNAV Prem/disc to ticker cap (local $) (local $) FY15 (x) FY16 (x) growth FY15 FY15 yield FY15 (local $) RNAV (USDm) FY15 Indonesia Alam Sutera Realty ASRI IJ 758.1 Buy 515 770 7.91 7.79 -15.4% 1.39 59% 1.2% 19.1% 1,199 -57% Bekasi Fajar BEST IJ 268.1 Neutral 371 820 6.82 5.98 24.8% 1.21 10% 2.3% 19.2% 1,309 -72% Bumi Serpong Damai BSDE IJ 2,400.8 Buy 1,665 2,400 11.54 10.67 22.5% 2.11 -5% 1.4% 19.7% 3,405 -51% Ciputra Development CTRA IJ 1,380.5 Neutral 1,215 1,490 13.14 11.83 16.9% 2.19 -11% 2.0% 18.4% 2,147 -43% Ciputra Surya CTRS IJ 382.5 Buy 2,580 5,000 9.40 9.21 10.4% 1.71 -15% 3.7% 19.4% 7,708 -67% Intiland Development Tbk PT DILD IJ 434.9 Buy 560 750 11.87 9.98 20.6% 1.20 30% 1.7% 11.1% 1,016 -45% Lippo Cikarang Tbk PT LPCK IJ 475.8 Buy 9,125 14,300 6.82 6.39 10.4% 1.77 -4% 0.0% 29.8% 19,272 -53% Lippo Karawaci LPKR IJ 1,910.5 Neutral 1,105 1,460 13.48 11.58 439.5% 1.76 53% 5.2% 11.8% 2,049 -46% Summarecon Agung Tbk PT SMRA IJ 1,826.6 Buy 1,690 2,000 15.08 13.38 11.9% 3.62 48% 1.9% 26.4% 2,866 -41% Surya Semesta Internusa Tbk PT SSIA IJ 361.3 Buy 1,025 1,420 9.11 7.40 27.7% 1.63 7% 1.3% 18.9% 1,543 -34% Agung Podomoro Land APLN IJ 520.7 Buy 339 520 6.34 5.87 27.1% 0.95 26% 2.3% 15.9% 544 -38% Indonesia average 10.14 9.10 54.2% 1.78 18% 2.1% 19.1% Thailand Amata Corporation AMATA TB 493.9 Buy 15.60 21.00 13.25 12.05 -43.5% 1.56 45% 2.6% 12.1% 25.00 -38% Ananda Development ANAN TB 344.2 Buy 3.48 4.80 8.74 6.54 9.6% 1.37 77% 2.2% 17.3% n.m. n.m. Asian Property AP TB 676.8 Buy 7.25 8.35 7.82 7.02 6.5% 1.27 85% 3.8% 17.3% n.m. n.m. Hemaraj Land & Dev HEMRAJ TB 1,313.3 Neutral 4.56 4.50 14.64 14.25 -6.9% 2.71 67% 3.7% 19.3% 4.50 1% Land and Houses LH TB 3,123.4 Neutral 9.00 9.65 16.21 14.36 0.2% 2.32 63% 4.9% 14.3% n.m. n.m. LPN Development LPN TB 805.7 Neutral 18.40 19.40 10.07 8.60 33.3% 2.28 31% 5.0% 24.1% n.m. n.m. Pruksa Real Estate PS TB 1,721.1 Buy 26.00 31.30 9.13 8.11 -4.9% 1.70 65% 3.3% 19.9% n.m. n.m. Quality Houses QH TB 877.5 Buy 2.76 3.80 7.37 6.98 3.3% 1.22 91% 6.7% 17.2% n.m. n.m. Sansiri PCL SIRI TB 792.1 Buy 1.87 2.30 8.53 7.39 -4.5% 0.93 129% 6.4% 12.0% n.m. n.m. SC Asset Corp PCL SC TB 411.7 Buy 3.32 4.10 7.61 7.27 7.5% 1.06 98% 5.0% 13.9% n.m. n.m. Supalai PCL SPALI TB 932.2 Neutral 18.30 21.80 6.72 6.52 4.4% 1.56 67% 6.2% 24.9% n.m. n.m. Ticon Industrial Connection PCL TICON TB 515.3 Neutral 15.80 19.50 12.14 12.15 1.8% 1.42 143% 6.3% 11.9% 19.50 -19% WHA Corp PCL WHA TB 1,544.6 Trading Buy 3.96 38.00 2.40 2.36 19.3% 0.65 90% 16.7% 30.0% UR n.m. Thailand average 9.59 8.74 2.0% 1.54 81% 5.6% 18.0% See important disclosures at the end of this report 57 RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Investment Research Disclaimers RHB has issued this report for information purposes only. This report is intended for circulation amongst RHB and its affiliates’ clients generally or such persons as may be deemed eligible by RHB to receive this report and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. This report is not intended, and should not under any circumstances be construed as, an offer or a solicitation of an offer to buy or sell the securities referred to herein or any related financial instruments. This report may further consist of, whether in whole or in part, summaries, research, compilations, extracts or analysis that has been prepared by RHB’s strategic, joint venture and/or business partners. No representation or warranty (express or implied) is given as to the accuracy or completeness of such information and accordingly investors should make their own informed decisions before relying on the same. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to the applicable laws or regulations. By accepting this report, the recipient hereof (i) represents and warrants that it is lawfully able to receive this document under the laws and regulations of the jurisdiction in which it is located or other applicable laws and (ii) acknowledges and agrees to be bound by the limitations contained herein. Any failure to comply with these limitations may constitute a violation of applicable laws. All the information contained herein is based upon publicly available information and has been obtained from sources that RHB believes to be reliable and correct at the time of issue of this report. However, such sources have not been independently verified by RHB and/or its affiliates and this report does not purport to contain all information that a prospective investor may require. The opinions expressed herein are RHB’s present opinions only and are subject to change without prior notice. RHB is not under any obligation to update or keep current the information and opinions expressed herein or to provide the recipient with access to any additional information. Consequently, RHB does not guarantee, represent or warrant, expressly or impliedly, as to the adequacy, accuracy, reliability, fairness or completeness of the information and opinion contained in this report. Neither RHB (including its officers, directors, associates, connected parties, and/or employees) nor does any of its agents accept any liability for any direct, indirect or consequential losses, loss of profits and/or damages that may arise from the use or reliance of this research report and/or further communications given in relation to this report. Any such responsibility or liability is hereby expressly disclaimed. Whilst every effort is made to ensure that statement of facts made in this report are accurate, all estimates, projections, forecasts, expressions of opinion and other subjective judgments contained in this report are based on assumptions considered to be reasonable and must not be construed as a representation that the matters referred to therein will occur. Different assumptions by RHB or any other source may yield substantially different results and recommendations contained on one type of research product may differ from recommendations contained in other types of research. The performance of currencies may affect the value of, or income from, the securities or any other financial instruments referenced in this report. Holders of depositary receipts backed by the securities discussed in this report assume currency risk. Past performance is not a guide to future performance. Income from investments may fluctuate. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. This report does not purport to be comprehensive or to contain all the information that a prospective investor may need in order to make an investment decision. The recipient of this report is making its own independent assessment and decisions regarding any securities or financial instruments referenced herein. Any investment discussed or recommended in this report may be unsuitable for an investor depending on the investor’s specific investment objectives and financial position. The material in this report is general information intended for recipients who understand the risks of investing in financial instruments. This report does not take into account whether an investment or course of action and any associated risks are suitable for the recipient. Any recommendations contained in this report must therefore not be relied upon as investment advice based on the recipient's personal circumstances. Investors should make their own independent evaluation of the information contained herein, consider their own investment objective, financial situation and particular needs and seek their own financial, business, legal, tax and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. This report may contain forward-looking statements which are often but not always identified by the use of words such as “believe”, “estimate”, “intend” and “expect” and statements that an event or result “may”, “will” or “might” occur or be achieved and other similar expressions. Such forward-looking statements are based on assumptions made and information currently available to RHB and are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement to be materially different from any future results, performance or achievement, expressed or implied by such forward-looking statements. Caution should be taken with respect to such statements and recipients of this report should not place undue reliance on any such forward-looking statements. RHB expressly disclaims any obligation to update or revise any forward- looking statements, whether as a result of new information, future events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. 58 The use of any website to access this report electronically is done at the recipient’s own risk, and it is the recipient’s sole responsibility to take precautions to ensure that it is free from viruses or other items of a destructive nature. This report may also provide the addresses of, or contain hyperlinks to, websites. RHB takes no responsibility for the content contained therein. Such addresses or hyperlinks (including addresses or hyperlinks to RHB own website material) are provided solely for the recipient’s convenience. The information and the content of the linked site do not in any way form part of this report. Accessing such website or following such link through the report or RHB website shall be at the recipient’s own risk. This report may contain information obtained from third parties. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. Third party content providers give no express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or use. Third party content providers shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs) in connection with any use of their content. The research analysts responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and autonomously. The research analysts that authored this report are precluded by RHB in all circumstances from trading in the securities or other financial instruments referenced in the report, or from having an interest in the company(ies) that they cover. RHB and/or its affiliates and/or their directors, officers, associates, connected parties and/or employees, may have, or have had, interests in the securities or qualified holdings, in subject company(ies) mentioned in this report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, RHB and/or its affiliates may have, or have had, business relationships with the subject company(ies) mentioned in this report and may from time to time seek to provide investment banking or other services to the subject company(ies) referred to in this research report. As a result, investors should be aware that a conflict of interest may exist. The contents of this report is strictly confidential and may not be copied, reproduced, published, distributed, transmitted or passed, in whole or in part, to any other person without the prior express written consent of RHB and/or its affiliates. This report has been delivered to RHB and its affiliates’ clients for information purposes only and upon the express understanding that such parties will use it only for the purposes set forth above. By electing to view or accepting a copy of this report, the recipients have agreed that they will not print, copy, videotape, record, hyperlink, download, or otherwise attempt to reproduce or re-transmit (in any form including hard copy or electronic distribution format) the contents of this report. RHB and/or its affiliates accepts no liability whatsoever for the actions of third parties in this respect. The contents of this report are subject to copyright. Please refer to Restrictions on Distribution below for information regarding the distributors of this report. Recipients must not reproduce or disseminate any content or findings of this report without the express permission of RHB and the distributors. The securities mentioned in this publication may not be eligible for sale in some states or countries or certain categories of investors. The recipient of this report should have regard to the laws of the recipient’s place of domicile when contemplating transactions in the securities or other financial instruments referred to herein. The securities discussed in this report may not have been registered in such jurisdiction. Without prejudice to the foregoing, the recipient is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. RESTRICTIONS ON DISTRIBUTION Malaysia This report is issued and distributed in Malaysia by RHB Research Institute Sdn Bhd. The views and opinions in this report are our own as of the date hereof and is subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. RHB Research Institute Sdn Bhd has no obligation to update its opinion or the information in this report. Thailand This report is issued and distributed in the Kingdom of Thailand by RHB OSK Securities (Thailand) PCL, a licensed securities company that is authorised by the Ministry of Finance, regulated by the Securities and Exchange Commission of Thailand and is a member of the Stock Exchange of Thailand. The Thai Institute of Directors Association has disclosed the Corporate Governance Report of Thai Listed Companies made pursuant to the policy of the Securities and Exchange Commission of Thailand. RHB OSK Securities (Thailand) PCL does not endorse, confirm nor certify the result of the Corporate Governance Report of Thai Listed Companies. Indonesia This report is issued and distributed in Indonesia by PT RHB OSK Securities Indonesia. This research does not constitute an offering document and it should not be construed as an offer of securities in Indonesia. Any securities offered or sold, directly or indirectly, in Indonesia or to any Indonesian citizen or corporation (wherever located) or to any Indonesian resident in a manner which constitutes a public offering under Indonesian laws and regulations must comply with the prevailing Indonesian laws and regulations. 59 Singapore This report is issued and distributed in Singapore by RHB Research Institute Singapore Pte Ltd and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these categories of investors, RHB Research Institute Singapore Pte Ltd and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of RHB Research Institute Singapore Pte Ltd ’s interest and/or its representative's interest in securities). Recipients of this report in Singapore may contact RHB Research Institute Singapore Pte Ltd in respect of any matter arising from or in connection with the report. Hong Kong This report is issued and distributed in Hong Kong by RHB OSK Securities Hong Kong Limited (興業僑豐證券有限公司) (CE No.: ADU220) (“RHBSHK”) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact RHB OSK Securities Hong Kong Limited. United States This report was prepared by RHB and is being distributed solely and directly to “major” U.S. institutional investors as defined under, and pursuant to, the requirements of Rule 15a-6 under the U.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”). RHB is not registered as a broker- dealer in the United States and does not offer brokerage services to U.S. persons. Any order for the purchase or sale of the securities discussed herein that are listed on Bursa Malaysia Securities Berhad must be placed with and through Auerbach Grayson (“AG”). Any order for the purchase or sale of all other securities discussed herein must be placed with and through such other registered U.S. broker-dealer as appointed by RHB from time to time as required by the Exchange Act Rule 15a-6. This report is confidential and not intended for distribution to, or use by, persons other than the recipient and its employees, agents and advisors, as applicable. Additionally, where research is distributed via Electronic Service Provider, the analysts whose names appear in this report are not registered or qualified as research analysts in the United States and are not associated persons of Auerbach Grayson AG or such other registered U.S. broker-dealer as appointed by RHB from time to time and therefore may not be subject to any applicable restrictions under Financial Industry Regulatory Authority (“FINRA”) rules on communications with a subject company, public appearances and personal trading. Investing in any non-U.S. securities or related financial instruments discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on non-U.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in the United States. The financial instruments discussed in this report may not be suitable for all investors. Transactions in foreign markets may be subject to regulations that differ from or offer less protection than those in the United States. OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST Malaysia RHB does not have qualified shareholding (1% or more) in the subject company (ies) covered in this report except for: a) - RHB and/or its subsidiaries are not liquidity providers or market makers for the subject company (ies) covered in this report except for: a) - RHB and/or its subsidiaries have not participated as a syndicate member in share offerings and/or bond issues in securities covered in this report in the last 12 months except for: a) - RHB has not provided investment banking services to the company/companies covered in this report in the last 12 months except for: a) - Thailand RHB OSK Securities (Thailand) PCL and/or its directors, officers, associates, connected parties and/or employees, may have, or have had, interests and/or commitments in the securities in subject company(ies) mentioned in this report or any securities related thereto. Further, RHB OSK Securities (Thailand) PCL may have, or have had, business relationships with the subject company(ies) mentioned in this report. As a result, investors should exercise their own judgment carefully before making any investment decisions. 60 Indonesia PT RHB OSK Securities Indonesia is not affiliated with the subject company(ies) covered in this report both directly or indirectly as per the definitions of affiliation above. Pursuant to the Capital Market Law (Law Number 8 Year 1995) and the supporting regulations thereof, what constitutes as affiliated parties are as follows: 1. Familial relationship due to marriage or blood up to the second degree, both horizontally or vertically; 2. Affiliation between parties to the employees, Directors or Commissioners of the parties concerned; 3. Affiliation between 2 companies whereby one or more member of the Board of Directors or the Commissioners are the same; 4. Affiliation between the Company and the parties, both directly or indirectly, controlling or being controlled by the Company; 5. Affiliation between 2 companies which are controlled, directly or indirectly, by the same party; or 6. Affiliation between the Company and the main Shareholders. PT RHB OSK Securities Indonesia is not an insider as defined in the Capital Market Law and the information contained in this report is not considered as insider information prohibited by law. Insider means: a. a commissioner, director or employee of an Issuer or Public Company; b. a substantial shareholder of an Issuer or Public Company; c. an individual, who because of his position or profession, or because of a business relationship with an Issuer or Public Company, has access to inside information; and d. an individual who within the last six months was a Person defined in letters a, b or c, above. Singapore RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or associated companies do not make a market in any securities covered in this report, except for: (a) - The staff of RHB Research Institute Singapore Pte Ltd and its subsidiaries and/or its associated companies do not serve on any board or trustee positions of any issuer whose securities are covered in this report, except for: (a) - RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or its associated companies do not have and have not within the last 12 months had any corporate finance advisory relationship with the issuer of the securities covered in this report or any other relationship (including a shareholding of 1% or more in the securities covered in this report) that may create a potential conflict of interest, except for: (a) - Hong Kong RHBSHK or any of its group companies may have financial interests in in relation to an issuer or a new listing applicant (as the case may be) the securities in respect of which are reviewed in the report, and such interests aggregate to an amount equal to or more than (a) 1% of the subject company’s market capitalization (in the case of an issuer as defined under paragraph 16 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the “Code of Conduct”); and/or (b) an amount equal to or more than 1% of the subject company’s issued share capital, or issued units, as applicable (in the case of a new listing applicant as defined in the Code of Conduct). Further, the analysts named in this report or their associates may have financial interests in relation to an issuer or a new listing applicant (as the case may be) in the securities which are reviewed in the report. RHBSHK or any of its group companies may make a market in the securities covered by this report. RHBSHK or any of its group companies may have analysts or their associates, individual(s) employed by or associated with RHBSHK or any of its group companies serving as an officer of the company or any of the companies covered by this report. RHBSHK or any of its group companies may have received compensation or a mandate for investment banking services to the company or any of the companies covered by this report within the past 12 months. Note: The reference to “group companies” above refers to a group company of RHBSHK that carries on a business in Hong Kong in (a) investment banking; (b) proprietary trading or market making; or (c) agency broking, in relation to securities listed or traded on The Stock Exchange of Hong Kong Limited. 61 DMG & Partners Research Guide to Investment Ratings Kuala Lumpur Hong Kong Singapore Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain RHB Research Institute Sdn Bhd RHB OSK Securities Hong Kong Ltd. RHB Research Institute Singapore Neutral: ShareLevel 11,price Tower may One, fall withinRHB Centre the range of +/- 10% over the next 1212 monthsth Floor Pte Ltd (formerly known as DMG & Partners Research Take Profit: TargetJalan price Tun has Razak been attained. Look to accumulate at lowerWorld levels-Wide House Pte Ltd) Sell: Share price mayKuala fall Lumpur by more than 10% over the next 12 months19 Des Voeux Road 10 Collyer Quay Not Rated: Stock is notMalaysia within regular research coverage Central, Hong Kong #09-08 Ocean Financial Centre Tel : +(60) 3 9280 2185 Tel : +(852) 2525 1118 Singapore 049315 Fax : +(60) 3 9284 8693 Fax : +(852) 2810 0908 Tel : +(65) 6533 1818 DISCLAIMERS Fax : +(65) 6532 6211 Jakarta Shanghai Phnom Penh This research is issued by DMG & Partners Research Pte Ltd and it is for general distribution only. It does not have any regard to the specific investment objectives,PT financial RHB OSK situation Securities and Indonesia particular needs of anyRHB specific OSK (China) recipient Investment of this research Advisory report. Co. Ltd. You should independentlyRHB OSK Indochina evaluate Securities particular Limited investments andWisma consult Mulia, an 20thindependent Floor financial adviser before makingSuite 4005, any CITIC investments Square or entering into any transactionNo. in 1re-3,lation Street to 271 any securities or investment inJl.struments Jend. Gatot mentioned Subroto No. in 42 this report. 1168 Nanjing West Road Sangkat Toeuk Thla, Khan Sen Sok Jakarta 12710, Indonesia Shanghai 20041 Phnom Penh The informationTel contained : +(6221) herein2783 0888 has been obtained from sources we believedChina to be reliable but we do not make any representatCambodiaion or warranty nor Fax : +(6221) 2783 0777 Tel : +(8621) 6288 9611 Tel: +(855) 23 969 161 accept any responsibility or liability as to its accuracy, completenessFax or : +(8621)correctness. 6288 9633 Opinions and views expressed in thisFax: report+(855) are23 969 subject 171 to change without notice. Bangkok This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities. DMG & Partners Research Pte Ltd is a wholly-owned subsidiaryRHB ofOSK DMG Securities & Partners (Thailand) Securities PCL Pte Ltd, a joint venture between OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment10th Floor, Bank Sathorn Berhad Square (the Officemerged Tower entity is referred to as “RHBIB” which in turn is a wholly- 98, North Sathorn Road, Silom owned subsidiary of RHB Capital Berhad) and Deutsche Asia PacificBangrak, Holdings Bangkok Pte 10500Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited.Thailand Tel: +(66) 2 862 9999 DMG & Partners Securities Pte Ltd and their associates, directors, and/orFax : +(66) employees 2 862 9799 may have positions in, and may effect transactions in the securities covered in the report, and may also perform or seek to perform broking and other corporate finance related services for the corporations whose securities are covered in the report. This report is therefore classified as a non-independent report. As of 5 September 2013, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd, do not have proprietary positions in the subject companies, except for: a) - As of 5 September 2013, none of the analysts who covered the stock in this report has an interest in the subject companies covered in this report, except for: a) - DMG & Partners Research Pte. Ltd. (Reg. No. 200808705N) 62 Thai Institute of Directors Association (IOD) – Corporate Governance Report Rating 2014 Excellent BAFS HANA KTB SAMART SIM BCP INTUCH MINT SAMTEL SPALI BTS IRPC PSL SAT TISCO CPN IVL PTT SC TMB EGCO KBANK PTTEP SCB TOP GRAMMY KKP PTTGC SE-ED Very Good AAV BKI DTAC KSL NMG PS SNP TIPCO UAC ACAP BLA DTC LANNA NSI PT SPI TK VGI ADVANC BMCL EASTW LH OCC QH SSF TKT VNT ANAN BROOK EE LHBANK OFM RATCH SSI TNITY WACOAL AOT CENTEL ERW LOXLEY PAP ROBINS SSSC TNL ASIMAR CFRESH GBX LPN PE RS STA TOG ASK CIMBT GC MACO PG S&J SVI TRC ASP CK GFPT MC PHOL SAMCO TCAP TRUE BANPU CNT GUNKUL MCOT PJW SCC TF TSTE BAY CPF HEMRAJ NBC PM SINGER THAI TSTH BBL CSL HMPRO NCH PPS SIS THANI TTA BECL DELTA ICC NINE PR SITHAI THCOM TTW BIGC DRT KCE NKI PRANDA SNC TIP TVO Good 2S AQUA CCET EA IFS MAKRO NTV PRG SIAM STPI TIC TUF AF ARIP CGD ESSO IHL MATCH NUSA PRIN SIRI SUC TICON TVD AH AS CGS FE INET MBK NWR PTG SKR SWC TIW TWFP AHC ASIA CHOW FORTH IRC MBKET NYT QLT SMG SYMC TKS UMI AIT AYUD CI FPI IRCP MEGA OGC QTC SMK SYNEX TLUXE UP AJ BEAUTY CKP GENCO ITD MFC OISHI RCL SMPC SYNTEC TMI UPF AKP BEC CM GL KBS MFEC PACE SABINA SMT TASCO TMT UPOIC AKR BFIT CMR GLOBAL KGI MJD PATO SALEE SOLAR TBSP TNDT UT AMANAH BH CSC GLOW KKC MODERN PB SCBLIF SPC TEAM TPC UV AMARIN BJC CSP GOLD KTC MONO PDI SCCC SPCG TFD TPCORP UWC AMATA BJCHI CSS HOTPOT L&E MOONG PICO SCG SPPT TFI TRT VIH AP BOL DCC HTC LRH MPG PPM SEAFCO SST THANA TRU WAVE APCO BTNC DEMCO HTECH LST MTI PPP SEAOIL STANLY THIP TSC WHA APCS BWG DNA HYDRO MAJOR NC PREB SFP STEC THREL TTCL WIN WINNER YUASA ZMICO IOD (IOD Disclaimer) การเปิดเผลผลการส ารวจของสมาคมส่งเสริมสถาบันกรรมการบริษัทไทย (IOD) ในเรื่องการก ากับดูแลกิจการ (Corporate Governance) นี้เป็นการ ด าเนินการตามนโยบายของส านักงานคณะกรรมการก ากับหลักทรัพย์และตลาดหลักทรัพย์ โดยการส ารวจของ IOD เป็นการส ารวจและประเมินจากข้อมูลของบรษัทจด ทะเบียนในตลาดหลักทรัพย์แห่งประเทศไทยและตลาดหลักทรัพย์เอ็มเอไอ ที่มีการเปิดเผยต่อสาธารณะและเป็นข้อมูลที่ผู้ลงทุนทั่วไปสามารถเข้าถึงได้ ดังนั้นผลส ารวจ ดังกล่าวจึงเป็นการนาเสนอ ในมุมมองของบุคคลภายนอกโดยไม่ได้เป็นการประเมินการปฏิบัติและมิได้มีการใช้ข้อมูลภายในในการประเมิน อนึ่ง ผลการสารวจดังกล่าว เป็นผลการส ารวจ ณ วันที่ปรากฎในรายงานการก ากับดูและกิจการบริษัทจดทะเบียนไทยเท่านั้น ดังนั้นผลการส ารวจจึงอาจ เปลี่ยนแปลงได้ภายหลังวันดังกล่าว ทั้งนี้บริษัทหลักทรัพย์ อาร์เอสบี โอเอส เค จ ากัด (มหาชน) มิได้ยืนยันหรือรับรองถึงความถูกต้องของผลการส ารวจดังกล่าวแต่อย่างใด