{"id":324319,"date":"2023-08-04T01:49:12","date_gmt":"2023-08-03T17:49:12","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=324319"},"modified":"2023-08-04T01:49:59","modified_gmt":"2023-08-03T17:49:59","slug":"top-stock-pick-in-philippine-property-sector","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/top-stock-pick-in-philippine-property-sector\/","title":{"rendered":"Here’s our top stock pick in the Philippine property sector"},"content":{"rendered":"\n

Analysis and Recommendation<\/h2>\n\n\n\n

Overall, we think mall developers offer clearer earnings growth visibility with little downside risks to its operations. Hence, our top pick for the property sector is SM Prime Holdings (SMPH)<\/strong>. Given its dominance in the mall operations space, SMPH is a direct beneficiary of sustained domestic consumption growth. Its residential take-up also recovered to record-high levels, and we expect take-up to further grow as the decline in mortgage rates should support the demand for residential projects catered to the middle-income segment. We have also seen positive developments in the Pasay reclamation project, and we expect the first island (60 hectares) to be completed by 2H23. Its valuation is also attractive given that it trades at a 25% discount-to-NAV (vs. 5Y average of 15%), making it a good entry point to BUY at current levels.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Recovery momentum was highly overlooked<\/strong><\/p>\n\n\n\n

Share prices of property stocks in our coverage underperformed the PSEi over the past two (2) years as sentiment remained bearish on the sector due to concerns over elevated interest rates, inflation, alongside rising office vacancy. These brought the stocks\u2019 discount-to-NAV to widen to 25%-85% from their 5Y mean. <\/p>\n\n\n\n

However, we think that the market overlooked the following: (1) mall revenues recovered back to pre COVID levels, and even grew quarter-on-quarter (q\/q) despite waning consumption after holidays in an elevated inflationary environment, and (2) residential take-up jumped to a new record-high in 1Q 2023. We maintain our positive view on Philippine properties and project earnings to grow at a 17% CAGR from 2022 to 2024 driven by sustained growth in the mall and residential sector. <\/p>\n\n\n\n

Malls rebound; consumption intact after holidays and despite high inflation <\/strong><\/p>\n\n\n\n

Mall revenues grew 68% year-on-year (y\/y), returning back to pre-COVID levels. Most companies removed mall concessions, while pent-up consumption supported higher tenant sales despite elevated inflation. Mall revenues also grew q\/q (despite 4Q being the seasonally strongest quarter due to Christmas spending); it appears that consumption remained robust even after the holiday season. Now that the COVID-19 pandemic is most likely behind us, we expect FY23F\/FY24F mall revenue growth to normalize to +27\/+8% (vs. +82% mall revenue growth in FY22).<\/p>\n\n\n\n

Residential take-up at record levels; but payment schemes remains loose <\/strong><\/p>\n\n\n\n

Despite the rising interest rate environment, residential pre-sales grew to a record level of Php133 billion. We expect aggregate residential pre-sales to grow at a CAGR of 10% as mortgage rates further decline, which should improve buying activities from middle-income buyers. However, we remain cautious on revenue bookings since payment schemes are expected to remain stretched to accommodate the less affluent residential buyers.<\/p>\n\n\n\n

Office revenues steady; but vacancies may rise on additional office supply <\/strong><\/p>\n\n\n\n

Office revenues remained flat as the occupancy rates of some developers started to decline with more tenants adopting the work-from-home (WFH) set up. Colliers estimates 2023 office vacancy to rise to 21% due to additional office supply backlogs.<\/p>\n\n\n\n

<\/div>\n\n\n\n

This report is prepared by PinoyInvestor\u2019s partner broker below. Find out more about our partner brokers<\/a> and sign up to avail their complete trading brokerage services.<\/em><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Here\u2019s a commentary on an important issue or event affecting the stock market<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-324319","post","type-post","status-publish","format-standard","hentry","category-special-reports","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"_links":{"self":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/324319","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/comments?post=324319"}],"version-history":[{"count":2,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/324319\/revisions"}],"predecessor-version":[{"id":324324,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/324319\/revisions\/324324"}],"wp:attachment":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/media?parent=324319"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/categories?post=324319"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/tags?post=324319"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}