Social distancing measures cycle in ASEAN
ASEAN property companies can weather new normal
Unemployment across ASEAN is rising and consumer sentiment testing new lows. Even as economies ease mobility restrictions, the road to recovery could be lengthy. This said, the majority of property companies have sound balance sheets and can weather this new normal, we think. Indonesia, Philippines, Vietnam and Singapore rank well on leverage. Thailand has higher risk. Sub-sector preference across ASEAN varies. But a common theme is lower pre-sales as residential bears the brunt of weak demand.
Balance sheets financially sound
The majority of ASEAN property companies are financially sound, our analysis indicates. Average gearing is not aggressive at 60% with undrawn credit facilities to weather the COVID-19 storm. Overall cash flow is healthy and the diversity of business segments should temper balance sheet stress, particularly for Singapore developers.
Weak residential pre-sales across ASEAN
Sub-sector preference amongst UBS ASEAN property analysts is varied. But a unanimous theme is residential pre-sales decline of 13 to 40% as COVID-19 headwinds dents demand. We are negative on residential in Thailand and Philippines and prefer dominant mall operators as economic recovery proxies. UBS Evidence Lab housing monitor on Philippines corroborates this view with signs of fatigue in the secondary market. Data on Singapore also indicates longer average days for market inventory. In Vietnam, however, we think residential should outperform retail on firm underlying demand. The owner-occupier housing segments in Indonesia and Malaysia should hold up better. In Singapore, we continue to like Industrial.