Housing Sector

Housing Sector

- Presales hit bottom in 1Q14, before recovering in 2Q14
The housing market showed apparent deceleration in 1Q14. Presales of
15 companies under our coverage in the quarter equated to B38bn or a
decrease of 23%qoq and 51%yoy, marking the fifth consecutive
quarter of contraction and a record low since the flooding crisis in late
2011. Customers became more hesitant and temporarily stayed away
from home purchase due to the current political uncertainty, while
housing developers postponed a launch of new projects. However,
presales would revive again in 2Q14 and normalize in the second half
of the year. Sales of both horizontal and condominium projects have
increased significantly in March – May 2014 and developers have
started to launch condominium projects again. Rejection rate has been
usual, while the policy interest rate has remained low at 2% and might
stabilize at that level in the rest of the year, thus favorable for homebuying
loan (the MPC is meeting on June 18, 2014, which might trigger
speculation in housing stocks again).
- 1Q14 profit grows 20%yoy. Strong growth foreseen in 2H14
1Q14 normalized profit of 15 housing companies under our coverage
was B5.3bn, down 41%qoq because of substantial condominium
transfer in late 2013 but up 20%yoy. Total revenue recognition
increased 13%yoy to B42bn, mainly from growing horizontal projects.
For the rest of the year, the profit is projected to stay flat qoq in 2Q14
and then recover in 2H14 from a transfer of 54 new condominium
projects, up from 32 projects in 1H14. Backlog at end-1Q14 has been
B265bn (B225bn for condominiums and B40bn for horizontal projects);
over B100bn of which is being transferred this year. Accordingly, we
estimate 2014 revenue to grow 13%yoy or B23.6bn. Based on
normalized profit margin assumption of 14.3%, the normalized profit
will be B31.6bn or the growth of 17.2%yoy.
- Selective buy for laggard stocks: RML, AP, ANAN
Presales have already bottomed out while 2014 profit would grow
continuously from a transfer of backlog. We, therefore, maintain
NEUTRAL for the housing sector and reiterate our recommendation of
selective buy, switching from SPALI and PS, whose share prices are
already close to fair value, to laggard stocks with low downside and
high upside: RML ([email protected] – 2014 profit would grow 90%yoy from a
transfer of 185 Rajadamri project; P/E ratio is low at 4.2x);
AP([email protected] – the share price is still cheaper than other mid- and
big-cap housing stocks; 2014 profit would grow 11%yoy);
ANAN([email protected]) – regular profit can be expected every quarter after
new projects gradually finish construction.