Today's Focus

Property and Bank - Expect volume demand for property to dip 20% on reduced affordability and access to funding; impact on banks may be visible after 1Q13.

The government has announced its seventh and most sweeping package of property cooling measures in over three years. In its most encompassing move to date, the government has further tightened financing for both public and private residential properties with loan-to-value (LTVs) lowered 20- 80% and raising additional buyer's stamp duty (ABSD) to 3- 18%, limit affordability of public housing with a higher mortgage service ratio as well as discourage multiple home ownership for SPRs and foreigners. To signal the intent of EC to remain as an affordable housing option, it also fine tuned demand and put in place guidelines on space and development periods. It has also implemented ABSD on the industrial sector to clamp down on speculative activity.

We expect volume demand to come off as buyers assess revised affordability and funding access.  Our current projection is for a 20% decline in volume sales for this year.We believe residential prices would see a potential downward pressure with large incoming supply of public and private housing from late 2013 and maintain our expectation for a 5% dip in private home prices this year. The key to watch for remains vacancy levels and rental yield spreads.

Shares of residential property developers have performed well in recent weeks. This makes them even more vulnerable to selling pressure as traders and investors rush to lock in gains. We note that the 14-day RSI of Capitaland, Ho Bee and Wing Tai shares are above the overbought level of 70. The stock price of Ho Bee and City Dev are even trading above our fundamental TP. We expect stock prices of the 5 to slice below the 15-day exponential moving average (EMA) and head for the 65-day EMA. For Wheelock and City Dev shares that are currently just c.4% above their 65-day EMA, a decline below that could send the stock lower towards the 200-day EMA.

Bank stocks are also likely to be affected by the latest property cooling measures. We expect housing loan growth to be supported by drawdown from previous mortgage applications over the next 1-2 quarters but will gradually reduce after that. We forecast mortgage loans to grow at 8% for FY13F, noting that there is still a market for natural new home buyers and HDB upgraders. As at 3Q12, DBS, OCBC and UOB's mortgage to total loans stood at 21%, 26% and 29% respectively. Each grew mortgage loans by 8%, 18% and 15% y-o-y respectively as at end 3Q12.Preference remains OCBC over UOB.  Given that UOB has the largest mortgage exposure, there may be near-term pressure on share price.

Tiger Airways enjoyed a significantly stronger year-on-year boost in loads and passenger numbers in December last year, as it recovered from a difficult 2011. The latest operating statistics show that the budget carrier appears to be on a steady growth trajectory, filling almost more than 85% of its seats systemwide. Tiger Singapore's passenger numbers grew 22% to 800 million revenue passengerkilometres (RPK) in December 2012, on the back of a 15% increase in capacity to 904 million available seat-kilometres (ASK). As a result, its y-o-y passenger load factor rose 6 percentage points to 89% as the number of passengers carried grew 19% to 436,000 passengers. The recovery was even more impressive in Australia, where Tiger Australia enjoyed a 90% surge in traffic to 268 million RPK in December 2012. At the group level, Tiger filled 86% of its seats in December, up from 83% a year earlier. Based on the operating statistics, we believe Tiger Airways could be profitable in 3Q13 (at the very least close to break-even), which would end its streak of 6 consecutive quarters of losses, and set a platform to return to full profitability in this calendar year. Maintain BUY, TP S$0.95.

Hyflux said that the water purchase agreement (WPA) for its first large-scale project in India has been finalised and signed. The agreement between Dahej SEZ Limited (DSL) and a special purpose company that Hyflux is in, Swarnim DahejSpring Desalination, will be for 30 years, including an estimated three-year construction period. The signing of WPA is positive as it shows that the project is progressing. However, construction can only start after Hyflux achieves financial close. Hyflux is expected to undertake an estimated US$420m worth of EPC work, we expect 20%/40%/40% to be recognised as revenue in 2013, 2014 & 2015 respectively.  

Separately, Hyflux reported that it has secured project financing for Tuaspring, Singapore's 2nd desalination plant currently under construction. This should remove funding concerns on this project. Maintain HOLD, TP: S$ 1.39.

PSA International saw an increase in container throughput at its ports in 2012 despite a challenging year for shipping amid a weak global economy. It handled 60.06m standardsized containers at its port projects around the world last year, a 5.2% increase in throughput over 2011. The increase was driven by its flagship PSA Singapore Terminals, which recorded a 6.4% increase to 31.26m TEUs. PSA terminals outside Singapore saw a 3.9% increase in throughput to 28.8m TEUs.

Source: DBSV