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Property stocks surge on cut in short-term interest rate

Charn Issara leads surge with 29.9% last week

Property stocks have gained more than 10 per cent over the past week in response to a decline in the central bank's short-term interest rate by 25 basis points to 2 per cent.

Charn Issara Development witnessed the highest surge with 29.9 per cent, said a brokerage, adding that the stock's price-to-earnings (P/E) ratio was the lowest in the sector, while dividend yield was as high as 6 per cent annually.

Small to medium-size property stocks saw a substantial rise.

While the SET Index between March 13 and 20 rose by 0.37 per cent, the property sector's index rose by 1.15 per cent. By stock, Charn Issara Development gained most with a 29.9-per-cent rise, followed by Natural Park with 16.67 per cent and Gold Property with 15.5 per cent.

Grand Canal Land stock was up 14.57 per cent while Rasa Property Development saw a surge of 11.93 per cent. Keppel Thai Property rose 11.56 per cent and N C Housing was up 10.17 per cent.

An analyst from a local brokerage said one reason for the increase in Charn Issara Development stock was speculations by investors after the company's P/E was the lowest with 3.52 times, compared with an industry average of 14.90 times.

"Moreover, Charn Issara's dividend pay-out was as high as 6.42 per cent," said the analyst.

In addition, property stocks that went with investment plans, including the launch of property funds, have been attractive to investors, said the broker.

An analyst at Maybank Kim Eng Securities (Thailand) said it favoured mid-sized property-development firms as it estimated that new supply this year would be 10 per cent lower than last year, especially condominiums. In the first two months, both volumes and values of new supply in the condo segment declined.

Moreover, launches of new residential units last month was the lowest in five years, driven by an 83-per-cent drop in condo launches. The condo segment represents a 26-per-cent share of the total property market.

The analyst recommended buys in property stocks with strong cash flow that were able to realise income in a short time as well as having a backlog to smooth their future income.

The analyst said the nine stock pick-ups were expected to record combined presales of Bt30 billion this quarter, down 5 per cent from the same period last year. But the broker expected that presales would improve and gradually return to normal in the second quarter. Negative factors included low investor confidence, few launches of new projects, and cancellations of unit bookings.

For the whole sector, total presales this year were expected to reach Bt202.05 billion, up 2 per cent from 2013.


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