ASEAN Property:Half time report

　　Property stocks in our equity research coverage are up 6% year-to-date

　　ASEAN Property stocks in our coverage have delivered an average ytd return of 6%(with dividends re-invested). Philippine property (PPROP: +10% ytd) and SREITs(FSTREI: +6% ytd) have done well thus far and we note investor bias towards stockswith recurring incomes. However, Singapore developers (with the exception of CIT)continue to struggle (FSTREH: -8% ytd), as the time line for policy rationalization hasbeen pushed back and changes in policy stance in China have not helped sentimenttowards developers with exposure there (most prominent being CAPL). For background,please see ASEAN property: What to expect in 2016 (2 December 2015).

　　Singapore and Philippines continue to remain our favourites

　　We continue to prefer Singapore (given valuations) and Philippines (given better growthprospects) to other ASEAN property markets. Singapore residential should stabilize; inaddition, we expect eventual policy rationalization, which should translate into improvedvolumes and asset churn. SREIT valuations are below historical average with supplyconcerns in the price (see report dated 18 May 2016, Singapore REITs: Taking stockpost results). Outside Singapore, Philippine developers are best placed to meet 2016presales targets (1Q: 24% of target), while the risk of a miss is increasing for Indonesia(1Q: 13% of target) and Thailand (1Q: 17% of target).

　　Preferred ideas (all rated Buy) – CIT, CAPL, ALI, PS, CCT, KREIT, FCT, FEHT

　　PB multiples are c30-40% lower for ASEAN developers and 17% lower for SREITsfrom May 2013 levels – and well below historical averages for some markets (notablyin Singapore – 42% lower than the historical average of 1.18x). From a bottom upperspective, many stocks offer healthy upside and we suggest focusing on undervaluedstocks with room for upside in the near term, or stocks where growth remainssupportive. Risks for the sector are higher interest rates and weaker currencies.