Analyst: DIBS curb would have little effect on banks

y Maybank Investment Bank Research

It has been speculated that Bank Negara is studying the risks arising from DIBS with a view of potentially imposing curbs on it.

ASSUMING the developer interest bearing scheme (DIBS) is curbed, we estimate the worst case scenario to be a marginal 0.7 percentage points (ppt) shave off our 2014 industry loan growth forecast of 10.5% to 9.8%.

We believe domestic banks have been more tempered in their exposure to the mortgage segment and channel checks point to limited exposure at this stage. We maintain our industry loan and earnings forecasts for the individual banks for now.

Speculation has it that Bank Negara is looking to curb the DIBS. General guidance is that such loans have made up 15%-20% of new mortgage loans over the past few years and thus some dampening effect is to be expected.

Nevertheless, we believe the impact is likely to be contained by the fact that housing loan growth of the Big 6 banks has been measured and such loans account for less than 5% of total residential loans for the big banks.

Assuming DIBS loans account for 20% of new mortgage loans, we estimate the worst case impact to be a marginal 0.7-ppt decline in our 2014 industry loan growth forecast to 9.8% from 10.5%.

While industry housing loan growth rose 13% year-on-year (y-o-y) in 2011 and 2012 respectively, housing loan growth for the Big 6 banks rose 14% y-o-y in 2011 and at a more measured pace of 10% y-o-y in 2012, with foreign banks picking up the slack in 2012.

Public Bank continues to be the most aggressive in the market, with growth of 17% y-o-y in 2012, but with stringent controls, we understand that DIBS loans make up less than 2% of its mortgage book and that it has been very selective about which developers it ties up with for this scheme.

Based on our channel checks, AMMB (2-year housing loan compounded annual growth rate of 6%) has shied away from the property sector for several years while DIBS loans account for about 1%, 2% and 5% of CIMB’s, Maybank’s and RHB Cap’s mortgage books respectively.

Any move to curb the DIBS would be aimed primarily at further curbing speculative activity in the property market. To be fair, measures to date such as the raising of the loan-to-value (LTV) ratio in 2010 and a hike in real property gains tax in January 2013 have had some success.

Bank Negara had highlighted in its 2012 Financial Stability and Payment Systems Report that ever since the imposition of a LTV ratio of 70% on individuals with more than two housing loans, the annual growth in lending to such individuals had declined sharply to 14.5% y-o-y in November 2010 to 1.9% y-o-y in December 2012.

Individuals with multiple housing loans made up less than 3% of total housing loan borrowers and their borrowings accounted for 13.7% of outstanding housing loans.

Source : Maybank Investment Research, June 27, 2013

Selangor Properties delayed launches but earned from land acquisition

PETALING JAYA: Selangor Properties Bhd’s net profit for the second quarter ended April 30, 2013 fell almost 40% to RM6.83mil from RM11.3mil in the same quarter last year.

However, it said in its filing to Bursa Malaysia that revenue for the quarter improved marginally to RM60.76mil from RM59.33mil a year ago.

In the group’s property investment holding segment, it achieved a higher profit compared with a year ago amounting to RM5.7mil, due to profit from compulsory land acquisition.

Meanwhile, the delay in new property development launches resulted in lower revenue and has incurred some losses.

The education segment also reported lower revenue and profits due to a decrease in classes conducted during the festive and holiday period, as well as lower enrolment by international students.

However, the group’s Australian operations posted a profit of RM17.7mil compared with a loss of RM1.4mil a year ago. “Higher gain in the current quarter was due to a revaluation surplus of RM19.8mil from Claremont Quarters.

The main income is from the rental of Claremont Quarters and its current occupancy remains high at 98.5%,” it said in a statement.

The group expects the property investment and education segments to remain stable and continue to contribute positively to the group.

Source The Star, 28 June 2013

Hope for Ho Hup now it will develop ‘Pavilion 2′ with Malton in Bukit Jalil

Mall set to be bigger than KL original, lauches due to kick off early next year.

KUALA LUMPUR: Ho Hup Construction Co Bhd is set to be profitable this year, reversing eight years of losses, in large part because it had struck a deal with Malton Bhd to co-develop the 24.28ha of land it owns in Bukit Jalil.

Malton, controlled by Datuk Desmond Lim Siew Choon, is said to be building a regional mall there dubbed “Pavilion 2” after the property tycoon’s flagship Pavilion KL on Jalan Bukit Bintang, along with other properties.

With 2 million sq ft of net lettable area (NLA), Pavilion 2 is even bigger than Pavilion KL’s 1.32 million sq ft and close to Mid Valley and the Gardens Mall’s combined 2.57 million sq ft.

Early artist’s impression of Ho Hup’s One Jalil project.

Malton is currently finalising its plans with City Hall for the 20.23ha portion of the land it is entitled to. The company may kick-start launches in the first quarter of next year, according to Ho Hup executive director Derek Wong.

The authorities have approved some nine to 10 million sq ft of NLA across the entire freehold Bukit Jalil development and a plot ratio of four, he told reporters following a shareholder’s meeting yesterday.

The development order for Ho Hup’s 4.05ha had been granted in February.

Wong said the response to initial launches of shop offices on its slice of land were well-received, with 90% sold so far, generating RM260mil in total sales.

Ho Hup’s 4.05ha is divided into Parcel A, a 2.38ha mixed project comprising offices, a hybrid mall and apartments above the mall, and Parcel B, which is purely residential. Parcel A had a gross development value (GDV) of close to RM400mil, Wong said. The potential value of Parcel B has not been finalised.

Parcel B is slated to be launched in the first quarter of next year. Although the details have yet to be concluded, the condominium would tentatively be 15 to 18 storeys high, with units ranging from 600 sq ft to 1,000 sq ft and eight to 10 units per floor, Wong said.

He added that Ho Hup did not plan to revalue its Bukit Jalil land, considered its most crucial asset, which was carried at a net book value of RM144.23mil. The land was acquired in 1995 at a cost of about RM30 per sq ft.

Early archived master plan of Ho Hup’s One Jalil project, now likely obsolete.

Meanwhile, Wong said the firm was on track to complete its regularisation exercise by September or October, and would thereafter seek to exit the PN17 category for financially distressed companies by mid-next year.

It had received the regulator’s nod for its restructuring on May 13 and can only apply to be uplifted from PN17 after showing two consecutive quarters of profit upon the completion of the regularisation. The regularisation exercise involves a capital reduction, a rights issue of loan stocks with free detachable warrants and a scheme to repay its creditors.

“Most of our creditors are agreeable to the debt restructuring. It’s a good deal because they don’t have to take a haircut and are getting either shares or cash.

“Ho Hup has been profitable for three quarters in a row now. All our business units are performing up to expectations,” Wong said.

Source The Star, June 28 2013