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Turnkey
Forget those January blues
Event
The Asia-Pacific real estate sector underperformed global real estate but
outperformed general equities benchmarks in January 2011. We believe the
sector remains compelling, with net earnings upgrades reflecting attractive
fundamentals in key markets. We maintain the recommendation to be
overweight Asia-Pacific property within a global property portfolio and
overweight property within an Asia-Pacific general equities portfolio.
Impact
Asia-Pacific property valuations are attractive trading at a PE relative to
the broader market and global property, which are significantly below the
long-run average. This is despite the potential upside to earnings and
valuations, given the significant improvement in fundamentals and strong
financial positions. This is evident in the ~3.5% upgrade to consensus’ CY11
EPS forecasts for Asia-Pacific property in the past three months. This leads
us to support the Macquarie Asia Strategy team’s recommendation that
investors should overweight the property sector.
Consensus earnings growth forecasts for FY11 have now accelerated to
~10.4%. This is despite consensus earnings growth forecasts moderating
from ~7.6% in June 2010 to ~6.4% in October 2010. The earnings revision
ratio found a new peak in December 2010 at ~2.2x, driven by significant
upgrades from: Japan, Singapore, China, Australia and Hong Kong. The
strength in December, combined with solid net upgrades in October and
November, saw the 4Q10 earnings revision ratio for Asia Pacific real estate at
1.7x. January has seen the momentum continue with the earnings revision
ratio net upgrades at 1.2x – with net upgrades for Australia and China, neutral
for Hong Kong and Japan, net downgrades for India and Singapore. .
Continuing to play the office cycle. Within the portfolio we have tried to get
exposure to the office recovery cycle, as we believe the demand-lead
indicators across Asia-Pacific look attractive. Furthermore, in particular
markets such as Hong Kong, the tight supply is compounding this, leading to
a very strong rent and asset value recovery. The stand-out markets are Hong
Kong, Singapore and Sydney.
Government measures and interest rates key risk. There is a general
tightening bias across the Asia-Pacific region, and we are closely monitoring
affordability ratios and the potential negative impact on residential property
markets.
Regional portfolio: Overweight Hong Kong and Singapore
Overweight: Hong Kong, Singapore, Thailand, Philippines and Indonesia.
Underweight: China, Japan, Australia and New Zealand.
Large-caps: Sun Hung Kai, Cheung Kong, Sino Land, Mitsubishi Estate,
Hysan Development, CapitaMall Trust, CapitaCommercial Trust.
Small-caps: Charter Hall, ARA Asset Management, Alam Sutera,
Summarecon Agung and Kenedix Realty Investment.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Turnkey
Forget those January blues
Event
The Asia-Pacific real estate sector underperformed global real estate but
outperformed general equities benchmarks in January 2011. We believe the
sector remains compelling, with net earnings upgrades reflecting attractive
fundamentals in key markets. We maintain the recommendation to be
overweight Asia-Pacific property within a global property portfolio and
overweight property within an Asia-Pacific general equities portfolio.
Impact
Asia-Pacific property valuations are attractive trading at a PE relative to
the broader market and global property, which are significantly below the
long-run average. This is despite the potential upside to earnings and
valuations, given the significant improvement in fundamentals and strong
financial positions. This is evident in the ~3.5% upgrade to consensus’ CY11
EPS forecasts for Asia-Pacific property in the past three months. This leads
us to support the Macquarie Asia Strategy team’s recommendation that
investors should overweight the property sector.
Consensus earnings growth forecasts for FY11 have now accelerated to
~10.4%. This is despite consensus earnings growth forecasts moderating
from ~7.6% in June 2010 to ~6.4% in October 2010. The earnings revision
ratio found a new peak in December 2010 at ~2.2x, driven by significant
upgrades from: Japan, Singapore, China, Australia and Hong Kong. The
strength in December, combined with solid net upgrades in October and
November, saw the 4Q10 earnings revision ratio for Asia Pacific real estate at
1.7x. January has seen the momentum continue with the earnings revision
ratio net upgrades at 1.2x – with net upgrades for Australia and China, neutral
for Hong Kong and Japan, net downgrades for India and Singapore. .
Continuing to play the office cycle. Within the portfolio we have tried to get
exposure to the office recovery cycle, as we believe the demand-lead
indicators across Asia-Pacific look attractive. Furthermore, in particular
markets such as Hong Kong, the tight supply is compounding this, leading to
a very strong rent and asset value recovery. The stand-out markets are Hong
Kong, Singapore and Sydney.
Government measures and interest rates key risk. There is a general
tightening bias across the Asia-Pacific region, and we are closely monitoring
affordability ratios and the potential negative impact on residential property
markets.
Regional portfolio: Overweight Hong Kong and Singapore
Overweight: Hong Kong, Singapore, Thailand, Philippines and Indonesia.
Underweight: China, Japan, Australia and New Zealand.
Large-caps: Sun Hung Kai, Cheung Kong, Sino Land, Mitsubishi Estate,
Hysan Development, CapitaMall Trust, CapitaCommercial Trust.
Small-caps: Charter Hall, ARA Asset Management, Alam Sutera,
Summarecon Agung and Kenedix Realty Investment.
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