Housing Sector

Housing Sector

- MPC cuts policy rate 0.25% to 2.25% to boost economy
The Monetary Policy Committee announced yesterday to cut the
policy interest rate by 0.25% to 2.25%, immediately effective,
because the Thai GDP has grown less than expected. The
government and private expenditure slowed down as a result of a
delay in the government’s mega investment projects, while private
confidence dropped as a result of the political unrest. No growth
has been seen in the export volume despite continuously
recovering world GDP. At the same time, the inflation rate
remained low. With all these factors, the MPC decided to impose a
loose monetary policy by cutting the policy rate in order to revive
the economy.
- Likely benefiting both consumers and housing entrepreneurs
We believe the policy rate cut would benefit the housing sector in a
form of more backlog project transference due to the low housing
loan rate and low rejection rate from banks for customers. The
companies that will benefit the most from this situation are those
with high backlog; top-five players are SIRI, PS, SPALI, AP, and
LPN. PS, SIRI, SPALI, and AP have lot of project transference due
in 4Q13, while PS, LPN, and SPALI have a large proportion of
middle- and lower- class customers which usually need loans from
commercial banks. Combined backlog of 15 housing companies
under our coverage at end-3Q13 is B280bn, making a new high;
B240bn are condominiums and B40bn are horizontal projects.
However, the lower interest rate will have insignificant benefit on
sales as customers have lower purchasing power due to increasing
household debt and condominium speculation trend has been
receding. Presales dropped to B56bn in 3Q13 from B61bn in 2Q13
and B75bn in 1Q13.
- NEUTRAL. PS and SPALI are top picks due to 4Q13 remarkable profit
The housing sector would receive positive sentiment from the
policy rate cut in the short term, while earnings in 4Q13 would be
the peak of the year from transference of many condominium
projects. We maintain NEUTRAL for the sector. Top picks are those
with remarkable 4Q13 profit, high backlog, and inexpensive