Mah Sing CIMB’s top property pick, drawing interest abroad

KUALA LUMPUR: CIMB has singled out the Mah Sing Groupas its top property pick, rating it Outperform while maintaining a target price of RM3.48 (the stock opened at RM2.49 on Wednesday, July 10).

It said the group’s strong earnings growth, new sales and landbanking efforts should provide re-rating catalysts, advising investors to continue to accumulate Mah Sing because “the group offers the best exposure to a pure Malaysian property play, backed by an excellent track record for execution and aggressive growth”.

CIMB reported that it had taken Mah Sing’s management on a “non-deal road show” to London, Edinburgh and Paris the week before to meet with investors keen to the latest in the Malaysian property market.

“There were no major surprises from the meetings as we have followed Mah Sing's progress closely. We believe investors were impressed with Mah Sing's strong performance over the years and its lofty ambitions which are tempered by carefully calculated moves,” it said.

Explaining that the group started as a plastic injection moulding company that expanded into the property business, it said Mah Sing retained one aspect of its original manufacturing culture – a relatively asset-light and quick-turnaround business model.

Mah Sing, in its meetings with the prospective investors, said it was most optimistic about the Klang Valley in light of the major infrastructure projects like the MRT and high-speed rail which will improve accessibility.

It said it was a bit more cautious about the prospects forIskandar Malaysia and was worried about a situation of potential oversupply several years down the road, especially when some high-end condos come onstream.

The group acquired four parcels of land this year, including two in Kuala Lumpur and Iskandar Malaysia, Johor for RM438.35 million, and is eyeing more landbank in the Klang Valley, with sizes ranging from 100-700 acres for township-oriented landbank.

“It is one of the few developers with exposure to all major property markets in Malaysia, i.e. the Klang Valley, Johor, Penang and Sabah. We share management's positive view on the Klang Valley in light of the Greater Kuala Lumpur Transformation Programme.

“We are more optimistic than Mah Sing on the longer-term potential of Iskandar Malaysia. We like Penang for its heritage status and the imminent completion of the second Penang Bridge, while Sabah can no longer be ignored as it has enjoyed some of the strongest residential price appreciation over the past 10 years. Mah Sing remains our top pick in the property sector,” CIMB concluded.

(The Star, July 10)

Buyers snap up Sunway Geo Phase 2

KUALA LUMPUR: Sunway Integrated Properties reported an overwhelming response to the soft launch of Phase 2 of its Sunway Geo development last week, recording a take-up rate of 70%.

Phase 2 which makes up a gross development value (GDV) of RM452mil of the RM1.5bil total GDV, comprising almost six acres of the entire 23.4 acre Sunway Geo integrated development, consists of 46 units of retail shops and 228 flexi suites.

The enthusiastic response follows the successful launch last year of Phase 1, now fully sold. The entire Sunway Geo development consists of shops, flexi suites, urban suites and residences.
Sarena Cheah, joint managing director of the property development division, Sunway Berhad, said the seamless connectivity to Sunway Resort City (SRC) was one of the reasons for its success.  

“Sunway Geo is well-positioned along the education and healthcare precincts while being seamlessly connected through the other five components of the SRC, namely retail, residences, offices, hospitality and leisure through canopied walkways and the elevated Bus Rapid Transit-Sunway Line.

The development also enjoys great accessibility to and from the rest of Klang Valley by a comprehensive network of road and rail. Also the ready catchment of 500,000 population within Bandar Sunway and Subang Jaya including 50,000 students coupled with the 40 million visitations per annum attests to the success of the development,” she said. 

The BRT-Sunway Line, lauded for its potential to transform the landscape of the SRC and boost of property values in the area, will have a stop right in front of the development. The BRT Sunway Line connects SRC to the Setia Jaya KTM Komuter station and the upcoming light rail transit (LRT) station at USJ, Subang Jay

(The Star, 9 July 2013)

BNM Implements Measures To Curb Rising Household Debt

KUALA LUMPUR, July 5 (Bernama) -- Bank Negara Malaysia (BNM) is implementing a set of measures, effective immediately, to curb the rising trend of household indebtedness and to reinforce responsible lending practices by key credit providers.

Governor Tan Sri Dr Zeti Akhtar Aziz said the measures were limiting maximum tenure of personal loans to 10 years and properties financing to 35 years, and prohibition on the offering of pre-approved personal financing products.

Also included was the setting of prudent debt service ratio that allowed sufficient buffer to deal with income volatility and other costs, she said.

Zeti said as of March this year, the ratio of household debt to gross domestic product (GDP) in Malaysia grew by 13 per cent to 83 per cent from 70 per cent in 2009, the highest level for developing countries in Asia.

"Given that the economy is now growing in the range of four to six per cent, we believe this level of indebtedness is not sustainable and that is why we are introducing these measures," she told a media briefing here Friday.

She said compared household debt to GDP in other developing Asian countries, Thailand stood at 30 per cent, Indonesia 15.8 per cent, Hong Kong 58 per cent, Taiwan 82 per cent, Japan 75 per cent and Singapore 67 per cent.

Zeti said the countries that have higher household debt to GDP were the US at 91.7 per cent, Australia 113 per cent, New Zealand 91 per cent, UK 114 per cent and South Korea 91 per cent.

The governor said central bank was putting in place responsible borrowing lending practices and prudent borrowing behaviour by the household sector.

She said the measures were aimed at ensuring a more sustainable household sector over the medium term, and gave an assurance that the sector contribute to growth of Malaysian economy in a sustainable manner.

"We decided to focus on household sector for these measures, so that there will be no confusion in the outcome that we want to achieve, which is sustainability of the household sector because it is such an important driver to our economy," she said.

Zeti said one of the factors contributing to the higher pace of household debt was the rising trend of personal loans which increased at an annual average rate of 20 per cent.

She said the rising role of non-bank financial institutions, which were supplying nearly 60 per cent of the personal financing to the households, was also a contributing factor.

"Of the total financing, 16.9 per cent are personal financing. In terms of growth rate of personal financing by non-bank financial institutions, last year it grew 29 per cent compared to the banks which grew 9.1 per cent.

"Aggressive competition in personal financing market has also contributed to lower financing rate that are not reflective of the associated risk," she said.

On the lengthy loan period, she said, while the longer tenure might reduce the monthly repayment, in the long run it will increase the overall debt burden of households.

Using housing loans as example, she said: "The tenure of housing financing has been lengthened to 45 years, though the monthly installment might be lower, but in the end it will cost 20 per cent more."

She added that such a practice encouraged excessive debt accumulation by households and increased the vulnerability of the sector.

Zeti said BNM has also urged financial institutions to give greater emphasise on affordability assessment as compared to repayment history and collateral which largely dominated the lending decision even when affordability assessment indicated potential future vulnerability.

"The affordability assessment is still not as robust as what we want to see.

"Our recent supervisory review of financial institutions' compliance with the guidelines are falling short of expectations, in a number of respect, resulting in lending decisions that are inconsistent with the obligation to ensure that financial products offered are affordable," she said.

Complementing the responsible lending guideline which was issued last year, the new measures applied to all financial institutions regulated by BNM, credit cooperatives regulated by the Suruhanjaya Koperasi Malaysia, Malaysia Building Society Bhd and Aeon Credit Services (M) Bhd, she said.

She said the limits on financing tenure will not affect applications made before today.

Extracted from BERNAMA, July 5, 2013