Maybank Remains Positive on Thai Property, Expecting Momentum to Continue in 2Q21

Maybank Kim Eng (Maybank) maintained a Positive rating on the property sector, expecting the good presales momentum in 1Q21 to continue in 2Q21. 1Q21 presales were healthy and earnings grew 20% YoY on average. Supalai Public Company Limited (SPALI) is likely to have the highest 1H21 earnings growth. Four of the five stocks under Maybank’s coverage will go ex-dividend between end-Apr and early May with a forecast 2H20 average yield of 4%. Developers of condominiums are trading at premiums on expectations of new stimulus measures allowing foreigners to buy Thai properties. Developers of landed properties are laggards YTD despite good earnings/presales performance.

 

Maybank estimated the 1Q21 earnings of stocks under its coverage including AP, LH, PSH, QH and SPALI grew by 20% YoY on average to a combined 5 billion baht from a low base in 1Q20. The best performers in terms of earnings growth YoY should be SPALI at around +50%, followed by AP +45% and LH +35%. The worst performer was likely to be PSH with a possible 30% YoY drop in earnings due mainly to low net margin at a single-digit rate. QH’s earnings, on the other hand, should have slipped modestly both YoY and QoQ. Note that Maybank also estimated 1Q21 sector presales grew by around 20-21% both QoQ and YoY to around 55 billion baht, driven by landed properties rather than condominiums.

 

For 2Q21 outlook, Maybank expected 2Q21F presales to increase slightly QoQ but to weaken YoY due to high base in 2Q20. Landed properties should continue to be the main growth driver as the majority of new condominiums won’t be launched until 2H21. As for 2Q21 earnings, expecting decent growth both YoY and QoQ as 2Q20 earnings were the lowest quarter last year.

 

There are new developments that could weigh on stocks in property sector include 1)  proposals to relax rules for foreigners to buy property in Thailand and 2) new financial instruments such as REITs with a buy-back condition, real-estate-backed token and assets warehousing to help companies with revenue-generating assets to survive amid the pandemic. While the first measure has yet to be finalised, the second has gradually progressed. The first REIT with a buy-back condition, GROREIT, which owns the Royal  Orchid Sheraton Hotel, is set to be launched in the near term.