Wednesday, March 10, 2010

Time to look at Property stocks

The property market, which staged a steady recovery last year after the slump in 2008, has now gone in overdrive. Some condominiums projects, which were launched in the past few months at exorbitantly high prices, were easily sold off. Properties in desirable location has enjoyed appreciation in value of 15-20% over the past one year. Despite the expected rise in interest rates this year, property developers are fairly confident that their sales will not be seriously impact. In view of this bright outlook, I think it is now time to buy property stocks which have not gone up too much.

From Chart 1, we can see that the Properties index has not moved up by much. I have appended below the charts of my three favorites- Sunrise, Suncity & IGB (the latter has limited exposure to property development). I believe that all three stocks should see decent price appreciation in the months ahead.



Chart 1: Properties' daily chart as at Mar 10, 2010_3.05pm (Source: Quickcharts)


Chart 2: Sunrise's weekly chart as at Mar 10, 2010_3.00pm (Source: Quickcharts)


Chart 2: Suncity's weekly chart as at Mar 10, 2010_3.00pm (Source: Quickcharts)


Chart 3: IGB's weekly chart as at Mar 10, 2010_3.00pm (Source: Quickcharts)
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8 comments:

  1. MaxWealth88Wednesday, March 10, 2010 8:37:00 PM

    hi alex,

    lately observed that MAS is dropping. is it due to the new rights share listing? noticed last time mrcb went up after its rights was listed. what do you think about MAS prospects?

    thanks
    maxwealth88

    ReplyDelete
  2. KCWednesday, March 10, 2010 10:30:00 PM

    last year we see developer introducing 5 : 95 scheme to attract buyer during financial crisis.

    Now I have encounter high end developer using 1 : 99 scheme.

    IF the property market is really good, there is no reason they use 1% scheme.

    This only shown than the market is realy not good. Not Good at all.

    ReplyDelete
  3. Alex LuThursday, March 11, 2010 8:46:00 AM

    Hi Maxwealth88,

    The rebound before the closing date of the acceptance of the Rights Issue, from a low of RM1.80 to the high of RM2.27, was a tad too sharp. It may be due to the over-the-top reaction to the good results announced or possibly a nudge by some friendly local funds. Whatever the reason, the stock is now ceding back some of the ground gained last week. I do not think it would break below the recent low of RM1.80. We could be seeing a set-up for a test of low and this could be a good buying opportunity for MAS as it approaches the RM1.80 level.

    ReplyDelete
  4. Voyager8Thursday, March 11, 2010 9:02:00 AM

    The quality of most property built nowadays has dropped, probably due to lower margin and higher building material cost, or lower quality sub-con.

    Even some projects by renown developer also like that.

    When quality dropped, foreigners might not want to buy, rich people who are demanding might not want to buy. With the current income level of local middle income people, how much can the property price go?

    Besides, I notice that there are many "bank lelong" here and there, and my property investor frens are claiming they bought some 2nd-hand properties at the cost much lower (5-figure ringgit discount) than the 1st-hand launching price.

    However, adapting the strategy of "buy low, sell high", if you think the property market, which I see is low now, can be recovered within next 1-2 years, now is really a good time to accumulate.

    ReplyDelete
  5. Alex LuThursday, March 11, 2010 9:04:00 AM

    Hi KC,

    I agree with your take on the negative aspect of easy money contributing to the runaway prices in the property market. A home is an essential in everybody's life. Excessive speculation would make home unaffordable for many, especially for young families just starting out. There is nothing sadder than reports of some poor families who used up their meager saving to buy a house, which is uncompleted & left abandoned by the developer. Why didn't they buy their home from a more reputable developer? Why did they buy in such distance location that nobody even bother to revive the abandoned housing scheme? The reason is simply that these families were trying to stretch their saving in order to own one of life's essentials- a home, a roof for themselves. It is the duty of a good government to help the people to own their home. In this sense, I believe the Singapore government has done its duty well. Let's hope our government will follow in its footstep.

    ReplyDelete
  6. Alex LuFriday, March 12, 2010 9:29:00 AM

    Hi Vogayer8,

    I agree with your observations. With regards to your comment on the bank auction notices at lower prices- which is quite prevalent these days- I had called up the agents or auctioneers on three occasions, only to be told that the owners have settled the loan or found a buyer. These auction notices may be fictitious. Could this be a tactic by moneylenders to pressurize the borrowers-cum-owners to settle their loan outstanding?

    ReplyDelete
  7. elizabethFriday, March 12, 2010 11:52:00 AM

    Developers have to contend with another problem with accounting standards... With new FRS recognition of profit is on completion basis. So, if nothing is completed in a financial year, they get zero profit. Worse, the profit recognised previously may also hve to be reversed. Unless coy has strong reserves, this change may affect coy from declaring dividends, and for fringe coys, they may even fall in PN17 (worse case scenario).

    The change will affect companies with fin year beginiing 1 July 2010...

    ReplyDelete
  8. kangmingwMonday, March 22, 2010 11:46:00 AM

    How bout MAHSING (8583)?

    ReplyDelete