J.P. 摩根-亚太地区-房地产行业-马来西亚房地产：M-REITs重新评级的时机已经成熟-2019.7.31-134页.pdf

Asia Pacific Equity Research31 July 2019 Malaysia PropertyM-REITs ripe for re-rating;selective on Residential DevelopersReal EstateHoy Kit Mak AC(60-3)2718-Bloomberg JPMA MAK JPMorgan Securities(Malaysia)Sdn.Bhd.(18146-X)Sin Wong(60-3)2718-JPMorgan Securities(Malaysia)Sdn.Bhd.(18146-X)Cusson Leung,CFA(852)2800-J.P.Morgan Securities(Asia Pacific)LimitedSee page 131 for analyst certification and important disclosures,including non-US analyst disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment We see select deep value opportunities emerging in the Malaysia Property sector after extended underperformance,noting a clearly weak backdrop.Residential property transactions have declined 3%p.a.since 2014,and unsold stock rose 34%in FY18 to a 16-year high of 17,000 units.Average transaction prices in four key states turned negative in FY18.These somber numbers may necessitate caution on Residential Developers,but we like SPSB(OW,66%RNAV discount)for exposure to the defensive mid-market segment.We are constructive on yield-sensitive M-REITs as interest rate declines do not appear priced in,with contrarian OWs on laggards KLCCSS&CMMT.We see SWB(OW)as a cheaper entry to SREIT(Neutral),with defensive yield support and Healthcare segment value unlocking.KLCCSS and SPSB are top OWs.We are constructive on Retail M-REITs with resilient DPU growth,forecasting+3.7%-4.0%CY20E/21E growth on AEI and organic drivers after flattish CY19E DPU.Weaker consumer sentiment is reflected in lower rent reversions,but earnings are supported by high occupancy rates averaging over 90%,with limited immediate threat from incoming supply.49%of CMMTs FY18 NPI is generated in Penang,providing an advantage through less Retail competition.Our analysis indicates large moves in the MGS-10Y bond yield are a reasonable predictor of M-REIT turning points:The YTD 49bps dip in MGS-10Y yield signals an inflection as in 2016.M-REIT performance has diverged,with SREIT and IGBREIT up 8%,outperforming the FBMKLCI down 3%vs KLCCSS and CMMT trading flat to-3%.Our forward target yield approach leads us to recommend contrarian OWs on KLCCSS and CMMT,for 12%/14%potential upside.We are Neutral on SREIT on valuation despite its strongest DPU growth from accretive asset injections,and prefer indirect exposure through SWB(OW).We are Neutral on IGBREIT as yield has compressed to fair value,with DPU risk from higher cash manager fees underappreciated.We are cautious on Residential Developers on unclear resolution to long-drawn imbalances,but feel negatives from a macroprudential-led slowdown are priced-in with the sector at trough RNAV discounts of-2SD and P/B at-1SD to-2SD.Long-drawn demand-supply imbalances could present M&A opportunity for Developers,all with manageable gearing.We expect sector FY19E/20E pre-sales growth of-6%/+4%,vs our top pick SPSB(OW)of+9%/+3%on its 63%exposure to the more resilient Klang Valley landed mid-market segment where affordability is rising.SPSB and SWB(OW)also provide exposure to the potential KL-SG HSR,JB-SG RTS,and Penang PTMP infrastructure plays.Key risk:Sharp declines in house prices leading to systemic risk.JPM Malaysia Property universeRatingTargetPotential UpsideRetail M-REITsKLCCSSOW8.8012%CMMTOW1.2014%SREITN2.005%IGBREITN1.80-6%Residential DevelopersSPSBOW2.5028%SWBOW1.9014%UEMSN0.856%MSGBN0.90-3%Source:J.P.Morgan estimates.2Asia Pacific Equity Research31 July 2019Hoy Kit Mak(60-3)2718- Table of ContentsStock Recommendations.3Investment Summary.4Our key thesis in killer charts.8Retail M-REITs:Imminent re-rating in a rate cut environment.9M-REIT valuation methodology:Time for change to capture turning point.12Defensive DPU growth of 3.7%-4.0%in CY20E-21E after year of AEIs.15Deep dive on M-REIT assets.19Retail segment outlook.21Office segment outlook.25Residential Developers:Survival of the fittest.26Residential mid-market landed segment is the only bright spot.36Comparable Analysis.39Developer valuation methodology.42What do current share prices imply for residential property prices?.44Appendix 1:M-REITs vs S-REITs.45Appendix 2:Developer key themes for stock-specific re-rating.49Appendix 3:Developer roadmap to a long-drawn recovery.52Appendix 4:Residential landed township model is insular;with upside potential for products and margins.57Appendix 5:Bank and Residential sector data.59Companies.63KLCCP Stapled Group.64CapitaLand Malaysia Mall Trust.70Sunway REIT.77IGB REIT.84SP Setia.91Sunway Bhd.103UEM Sunrise.113Mah Sing Group.1223Asia Pacific Equity Research31 July 2019Hoy Kit Mak(60-3)2718- Stock RecommendationsM-REITs(Retail)KLCC Stapled Group(KLCCSS,OW)Large,liquid and laggard KLCCSS is our top M-REIT pick poised for re-rating on 49bps lower long bond yields.Key driver is highly defensive FY20E net DPU growth of+3.5%post-asset works at Suria KLCC.CapitaLand Malaysia Mall Trust(CMMT,OW)We forecast CMMT FY19E/20E net yields of 5.6%/5.8%,the highest within our coverage universe.In the current environment of declining interest rates,our non-consensus forward yield valuation approach implies 14%upside to our PT.Sunway REIT(SREIT,Neutral)We expect SREIT to deliver the strongest and most consistent DPU growth(+3.9%/+4.8%)vs peers over CY19E/20E supported by the Education campus acquisition and major asset Pyramid Mall.However,we believe this is priced in on YTD 8%share price rise since Jan-19.IGB REIT(IGBREIT,Neutral)We believe IGBREIT is fully valued(up 8%since Jan-19)after tracking the MGS-10Y bond yield(down 49bps),and expect near-term drag to DPU growth(FY19E:-1.2%)from cash payments of manager fees previously paid in units(FY19E:35%).Developers(Residential)SP Setia(SPSB,OW)We believe SPSB is both the dominant and most defensively positioned,with 63%of FY19E/20E pre-sales coming from the more resilient landed mid-market segment.This translates to the strongest earnings growth vs peers at 7%/40%in FY19E/20E,with support from low valuations at trough 66%RNAV discount.Sunway(SWB,OW)We like SWB for its defensiveness,with recurring earnings making 48%-50%of FY19E-21E EBIT,and see it as a cheaper entry to defensive but fairly valued SREIT(Neutral,17%of FY19E EBIT).SWB also offers potential upside from Construction segment new order book,and potential longer-term value-unlocking from a planned listing of its Healthcare business,which we feel would come in FY21E at the earliest.UEM Sunrise(UEMS,Neutral)UEMS is pivoting away from landed projects in the Iskandar Johor region to new high-rise projects in Klang Valley,which we feel trades in geographical risk for product risk(high-rise segment).However,UEMS has near-term earnings support from completing projects in Australia(65%-92%settlement within the quarter of completion),and valuation support at the current trough RNAV discount of 69%.Mah Sing(MSGB,Neutral)MSGB has the most exposure to the more challenging high-rise and mass segments(65%-66%of GDV),with FY19E/20E adjusted earnings dragged by flat revenues and higher finance costs/coupon payments.We feel these risks are fairly reflected with share price down 29%from a year ago to trough-2SD to stock P/B and RNAV.4Asia Pacific Equity Research31 July 2019Hoy Kit Mak(60-3)2718- Investment SummaryRetail M-REITs are ripe for re-rating on lower interest rates Within the Malaysia Property sector,we believe M-REITs are ripe for a re-rating to track the 49bps compression in MGS-10Y long bond yields since Jan-19,with further widening expected on additional interest rate cuts expected in 3Q19.While M-REITs have historically been expensive from a regional perspective,we believe this is supported by a largely captive domestic government linked funds with around M$1.4T in AUM(around 60%in equity)roughly equal to the FBM100 market cap of M$1.4T,stoking domestic appetite for defensive yielders like the M-REITs.We take a contrarian OW on laggards KLCCSS and CMMT,and are Neutral on IGBREIT and SREIT.Figure 1:JPM M-REIT universe price index vs MGS-10Y bond yieldsSource:Bloomberg,J.P.Morgan estimates.We believe large moves in the MGS-10Y bond yield are a reasonable predictor of M-REITs turning points through a tactical forward yield approachWe observe that during the previous period of yield compression between Jan-16 and Aug-16 when the MGS-10Y yield fell 74bps from 4.2%to 3.5%,M-REITs were up 8%-23%.In contrast,this time while the MGS-10Y has slipped 49bps from 4.1%to3.6%,IGBREIT and SREIT are up 8%and outperforming the FBMKLCI down 3%,vs KLCCSS and CMMT trading flat to-3%.We believe the forward yield approach can more reflexively capture the M-REIT turning points and potential upside as we anticipate the sector will consistently overshoot consensus DDM based valuations in the current environment of declining interest rates.We use historical trough yields of 4.25%-4.95%achieved by individual REITs over our Jan-16 to Aug-16 reference period as the basis for our more tactical forward yield based fair values.These imply 12%upside for KLCCSS,14%upside for CMMT,5%upside for SREIT,and 6%downside for IGBREIT.Defensive DPU growth led by AEIs and high occupancy,despite weaker consumer confidence We forecast flattish CY19E DPU growth,with AEI completions(KLCCSS and CMMT)and organic growth(SREIT,IGBREIT)driving+3.7%-4.0%DPU growth in CY20E-21E.Weaker consumer sentiment is reflected in lower rental reversions,but earnings are supported by high occupancy rates averaging over 90%,with limited immediate threat from incoming supply.CMMT holds an advantage in Penang where there is less Retail competition,receiving 49%of FY18 NPI from the state.5Asia Pacific Equity Research31 July 2019Hoy Kit Mak(60-3)2718- SREIT the only beneficiary of rate cut,prefer exposure through SWB(OW)SREIT is the only beneficiary of rate cuts as around half of its debts are variable.We estimate that every 25bps cut in interest rates translates to a 1.2%increase in FY20E/21E distributable income,and a 7ppts increase in dividend yield.SREIT is also a key beneficiary of parental asset injection as part of township model growth.We prefer exposure to SREIT via SWB(OW).Upcoming office supply is ample,but KLCCSS is ironically the most defensiveThe office segment is plagued with oversupply with an 80%average occupancy rate.The only M-REIT with significant exposure is KLCCSS with 52%contribution to FY18 operating profit,but in our view de-risked by long-term,triple-net master leases signed mainly with sponsor Petronas,providing earnings stability.Table 1:Retail REITs peer comparisonAs at:31 Jul-19TickerFYEMkt cap PriceRatingTargetNet div yieldNet DPU growthNet yield spreadP/B(US$mn)(LC)(LC)CY19ECY20ECY19ECY20ECY19ECY20EFY19EFY20ECapitaLand MalaysiaCMMT MKDec5201.05OW1.205.6%5.8%-17.5%3.0%2.0%2.2%0.850.88IGB REITIGBREIT MKDec1,6491.92N1.804.3%4.4%-1.2%3.0%0.7%0.8%1.741.64KLCC Property HldgsKLCCSS MKDec3,4277.84OW8.804.5%4.6%1.5%3.5%0.9%1.1%1.050.99Pavilion REITPREIT MKDec1,3761.87NC-4.3%4.4%1.4%3.4%0.7%0.8%1.431.43Sunway REITSREIT MKJun1,3621.91N2.004.7%4.9%3.9%4.8%1.1%1.3%1.181.15Weighted average*6,9584.6%4.7%1.0%3.5%1.0%1.1%1.221.17Weighted average*(ex-KLCC)3,5314.6%4.8%-1.2%3.7%1.1%1.2%1.391.34Source:Bloomberg,J.P.Morgan estimates.*Covered stocks only.Residential Developers going through a rough patch,with visibility within landed mid-market segmentResidential Developers are value plays but watch out for value trapsResidential Developers have underperformed the FBMKLCI by 27%since end-2014,as property cooling measures introduced from 2010-14 to tame rising household debt amid an over-heating property market resulted in falling pre-sales and margins.That said,Developer margins are stabilising,with the sector trading at its trough RNAVdiscount(-2SD)and P/B(between-1SD and-2SD).We also take comfort in manageable net gearing of 30%-50%(ex-MSGB in net cash)for Developers under our coverage.As conditions are not yet conducive for a meaningful pick up in pre-sales,and neither do we expect any relaxation of macroprudential measures,this sector might continue being a value trap.We prefer SWB for cheaper exposure to SREIT,and yield support.We like SPSB(66%RNAV discount)for exposure to the defensive landed mid-market segment.Residential pre-sales declining if not for SPSB given exposure to landed mid-market segment where affordability is rising For our JPM universe,we are forecasting FY19E/20E pre-sales growth(excluding SPSB)of-6%/+4%.SPSBs normalised pre-sales growth of+9%/+3%is bucking the trend as 63%of FY19E-21E domestic pre-sales is exposed to the more resilient landed mid-market residential segment in the Klang Valley.Contrary to market expectations,based on NAPIC data for median house prices of M$297,000,theimplied mortgage burden of 25%(loan repayments as a%of income)as a measure of affordability remains reasonable,and is expected to drop to 23%after the 25bpsinterest rate cut in May-19,with a second 25bps cut expected in Sep-19.6Asia Pacific Equity Research31 July 2019Hoy Kit Mak(60-3)2718- Figure 2:Malaysia historical mortgage burden(loan repayments as a%of income)Source:Department of Statistics,NAPIC,J.P.Morgan.Figure 3:JPM Developer universe plus ECW(NC)landed pre-sales(M$mn)Source:Companies,J.P.Morgan.Figure 4:JPM Developers landed mid-market pre-sales as a%of domestic showing future pre-sales defensivenessSource:Companies,J.P.Morgan estimates.Imbalances within the residential segment likely long drawn;supply/price has to give wayMalaysia residential property transactions slowed from a 2010-14 CAGR of+13%to a post-2014 CAGR-3%,with 2018 unsold stock rising 34%to 17,000 units,the highest in 16 years.In 2018,average transaction prices for our 4 key states turned negative for the first time since 2015(ex-Selangor which stayed flat).Among the developers we cover,unsold stock accounts for 25%-56%of FY18 domestic pre-sales.Given high household debt levels,the reset in our view will have to be led by a supply side rebalancing,with either lower supply or lower prices,both of which are likely to be involuntary responses from pure developers.Margins already at bottom for developers under our coverageDevelopers core operating margins have contracted from 19%-23%in FY12 to stabilize at 18%-20%in 2018 as a result of a shift in product mix from higher-end products to more affordable products;as well as intense competition amid lacklustre demand.Our analysis of Developer product mix,historical pre-sales,and future pre-sales indicate FY19 is the year of bottoming,with margins of between 15%-23%.7Asia Pacific Equity Research31 July 2019Hoy Kit Mak(60-3)2718- Developers financial stress might open up opportunities for M&A for the stronger playersA deep dive on listed property developers in Malaysia reveals that half have net gearing of 50%,and interest cover