Housing Sector

Housing Sector
- 1H13 profit grows 41%. Backlog of B270bn, new high, to boost 2H13 profit
15 companies under our coverage made total 1H13 norm profit
at B11.4bn, growing 41.1%yoy. Due to increasing house and
condominium delivery, as well as higher profitability, norm profit
margin grew from 12.6% in 1H12 to 13.3%. For the financial
structure, liabilities and shareholders increased at the same
rate, keeping net gearing rate at 1x. End-2Q13 backlog made
the new record at B270bn (B191bn for condominiums, B39bn for
houses), which might be delivered in the remainder of the year
at the value over B80bn, boosting 2H13 revenue to B122bn
from B86bn in 1H13. 3Q13 profit is likely to rise and make the
highest in 4Q13. Overall, housing sector’s FY2013 total profit
would grow by 31.5%yoy or B31.3bn.
- Low GDP growth, weak purchasing power, stricter loan issuance affect share prices
1H13 presales made the highest at B136bn, rising 28.7%yoy
due to high sales of new projects, especially condominium with
high selling speed, as well as high consumer confidence on
property. Property market in 2H13 would face internal pressure:
lower 2Q13 GDP growth than expected, low demand due to
rising household debt, commercial banks’ strict policy on loan for
second house and heated political issues, which would press
consumer confidence. Also, the new projects would be launched,
which would decelerate 2H13 total presales. However, the
backlog would greatly fulfill FY2013 income target, keeping
earnings and profit forecast unchanged.
- Cut stocks’ fair value but maintain NEUTRAL for the sector. Top picks: AP, SPALI, PS
We cut this sector’s fair value averagely by 2x PER to match
declining markets’ PER. As 2H13 earnings forecasts are likely to
be blissful, we reiterate “NEUTRAL” and recommend stocks with
great 2H13 profit, high upside and dividend. Top picks are AP,
SPALI and PS.