A look at Selected Property Stocks

While the property sector is at the epicenter of the US sub-prime crisis-- that has morphed into a full-blown financial crisis-- here in Malaysia the property sector has not been that badly affected. While suffering from a sharp fall in demand, the property sector may not be settled with excessive inventory of unsold properties, unlike 1998. Nevertheless, the drop in the share prices had been very sharp and the valuation is pretty attractive.

I have examined 5 of my favorite property stocks (E&O, IGB, KLCCP, Suncity & Sunrise) to see how were their recent financial performance & position; their valuation; and technical outlook.

From Table 1, we can see the following:
1) all 5 companies are still reporting fairly good profit. IGB, KLCCP & Suncity have more exposure to investment properties and are less likely to suffer from slumping sale (unlike E&O and Sunrise).
2) IGB & KLCCP's gearing ratio is fairly low at less than 0.4 time, while E&O's gearing is considered high at 0.9 time.
3) Suncity & Sunrise's current ratio is considered low at 1.2-1.3 times, while IGB, KLCCP & Suncity's current ratio is considered very comfortable at 1.9-2.5 times.
4) E&O and Suncity are currently priced at 0.4 times their respective book value, while IGB, KLCCP & Sunrise are priced at 0.7-0.8 their book value.
5) Suncity & Sunrise have the lowest PE multiple of about 4 times, while E&O, IGB & KLCCP's PE multiple is about 12-16 times.

So, Suncity looks the most attractive with both low Price to Book as well as PE. Sunrise will be one rung behind with low PE but higher Price to Book.


Table 1: Selected Property Stocks' Financial & Valuation highlights

From Table 2, I have tabulated the technical outlook of the 5 stocks. IGB & KLCCP are beginning to show signs of recovery.


Table 2: Selected Property Stocks' Technical Quick Check

I have appended the monthly chart of KLCCP & IGB for your perusal.


Chart 1: IGB's monthly chart as at Feb 16, 2009 (source: Quickcharts)


Chart 2: KLCCP's monthly chart as at Feb 16, 2009 (source: Quickcharts)

Based on the above, you may choose to slowly accumulate some shares of IGB & KLCCP (which promise earlier price recovery) while continue to track Suncity as well as Sunrise (which offers more attractive valuation).