Could Property Stocks Take Off In A Bigger Wave?

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Jan 25 2007
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According to Aseambankers Research, Visit Malaysia Year 2007 (VMY 2007) will boost the earnings of transport operators, retail outlets, hotels and telecommunications as 20.1 million visitors are expected to throng the country throughout the year. If you have noticed, the stock prices of property companies have seen an uptrend never happened for quite some time.

Focusing on the property sector, stocks with exposure to retail such as KLCC Property, KrisAssets Holdings Berhad (KLSE: KASSETS, stock-code 6653), Starhill REIT (KLSE: STAREIT, stock-code 5109) and Hektar REIT (KLSE: HEKTAR, stock-code 5121) will definitely see improvement in its’ earning. On the other hand Genting Berhad (KLSE: GENTING, stock-code 3182), Resorts World (KLSE: RESORTS, stock-code 4715), Sunway City (KLSE: SUNCITY, stock-code 6289) and Pulai Springs (KLSE: PSPRING, stock-code 5059) would likely enjoy better earnings from higher hotel occupancy rates.

Earlier, UBS (NYSE: UBS, stock) Investment Research has raised its target price for IGB Corp Bhd (KLSE: IGB, stock-code 1597) and KLCC Property Holdings Bhd (KLSE: KLCCP, stock-code 5089) on expectation that the developers will benefit from robust office rents and strong tourist arrivals this year. IGB, operator of Mid Valley City which comprises office, retail and hotel offerings, had its target price lifted to RM2.50 from RM1.96.

A week later, IGB Corporation Bhd clarified to stock exchange that it has received no proposal for the sale of its five-star Renaissance Kuala Lumpur hotel which was reported by a newspaper. The report values the possible deal at about RM850 million prompting the stock of IGB to hikes. The potential buyers reported were Genting Group, Permodalan Nasional Bhd, YTL Corp Bhd or Malaysia Land Properties Sdn Bhd.

UBS also raised KLCC Property, which has property assets such as the Petronas Twin Towers, Suria KLCC and the Mandarin Oriental hotel – to RM3.50 from RM2.88. KLCC Property is also expanding its assets via Lot C, a mixed development project in the vicinity of the Petronas Twin Towers.

Yesterday, Malaysia’s Eastern & Oriental Berhad (KLSE: E&O, stock-code 3417) raised 64 million ringgit ($18.3 million) by selling a 5.2 percent stake in subsidiary E & O Property Development Berhad (KLSE: E&OPROP, stock-code 3468) to a global investment mutual funds manager, Capital International. This will result in a gain of some 24.8 million ringgit for the year ending March 31, 2007.

Foreign investors also are clamoring to get into the Philippine real estate market but an ownership cap and a dwindling supply of prime property is hindering investments.

Thailand risks losing some of its resort home market to Southeast Asian rivals Malaysia and the Philippines if it goes ahead with plans to close a loophole that lets foreigners own freehold property. Currently, foreigners cannot own landed property, according to Thai law – only apartments are allowed. But many buyers have sidestepped the rule by holding property through a local company, which they control because Thai “nominee” majority shareholders waive voting rights. The Thai government wants to change the Foreign Business Act to outlaw such nominees, leaving foreigners with only the option of a maximum 30-year lease.

It could be the combination factors of Visit Malaysia Year, Kuala Lumpur stocks bullishness and capital inflows from neighboring countries that contribute to the run-up of the property-related stock prices. Nevertheless, investors who managed to secured shares of KLCC Property during the IPO would have better dreams at night now that their stocks begin to move in tandem with Composite Index. So, are you bullish on property stocks based on current trend?

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Expectation of 21 million visitors during VMY2007 is one thing but the reality could be quite different. Malaysia has had some bad foreign press lately, particularly in regard to the American couple stopping by in Penang who were rudely awakened in the wee hours of the morning by some religious zealouts and accused of khalwat (close proximity, an offence in Islam for those still single). The American couple had left their marriage certificate at home back in the U.S. And African Americans would want to steer clear, seeing that some of their brethren were picked up in Petaling Street, handcuffed and put under intense interrogation at the Jalan Silang police station. The African Americans who suffered the full brunt of the Malaysian police said they were the victims of racial profiling. But if the present trend of a rising Composite Index and a bear broad market trend is any guide, blue chip property stock components of the Composite Index may well continue rising but I wouldn’t put my money down on second and third liner property counters.

i have no doubt about the bad experience and press about malaysia being the preferred destination within this region after the american couple’s case …

which should not have happened if only the government is serious about attracting genuine tourists …

however there’re simply too many little napoleans in malaysia – to which the government doesn’t seems to care …

either blue chips, second or third liners, as long as the company has a good management and profitable based on capability, one can consider it …

people used to consider uem and renong as blue-chip property companies before the 1997 crisis but history has shown how such political-linked companies will vaporised when bail-out is not within sight …

cheers …

Outsider is right,

When outsider is coming here for fun but we don’t let them to have ‘fun’ … this doesn’t sound very correct. 🙂

i agreed zentrader … if only the malaysian government knows the meaning of competition and the skills & know-how to attract foreign currencies for the sake of country’s prosperity instead of “frustrating” them …

cheers …

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