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Say Good Bye To Property Market
 

Say Good Bye To Property Market

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We expect transactions to fall and prices to ease in 2009, in line with the projected 3% ...

We expect transactions to fall and prices to ease in 2009, in line with the projected 3%
real GDP contraction. Transactions could fall 20-30% or as much as 35-50% in the
worst-case scenario, matching the performance during the 1997/8 Asian financial
crisis. However, most major developers have pushed out innovative financing
schemes to lure buyers. Response has been mixed, with good response garnered by
the likes of SP Setia (RM500m sales) and Mah Sing (RM170m sales) but lacklustre
sales for many other developers

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    Say Good Bye To Property Market Say Good Bye To Property Market Document Transcript

    • SECTOR UPDATE 6 May 2009 MALAYSIA CIMB Research Report Maintained TRADING BUY Property Property Market Report 2008: Surprisingly resilient Terence Wong CFA +60(3) 20849689 - terence.wong@cimb.com • Volumes transacted were strong. Much to our surprise, the recently released Property Market Report 2008 revealed a very healthy clip for transacted volumes and values, not just for residential properties, but for all sub-sectors. Transaction value notched a brisk rate of 14.5% while the number of transactions went up 10%. We had expected transaction values and volumes to be flat at best due to political uncertainty after the 8 Mar general elections and the global credit crunch which peaked in Oct. But signs of rapid cooling were evident in 4Q08 as volume and value fell 18-20%. This should spill over into 2009. • House prices continue to head higher. Less surprising was the decent rise in house prices for most of the country. Overall house prices appreciated 4.8% in 2008, matching the gain in 2007. Of the big-3 markets, Penang enjoyed the steepest appreciation of 10.4% while the Klang Valley’s gain of 4.5% actually fell slightly behind the 5.4% inflation rate. Johor was an unexpected major letdown, with prices dipping 0.1% in 2008, which means that house prices in the state are relatively unchanged from 10 years ago. For the other states, all except Terengganu registered price appreciation in 2008. • Commercial occupancies softened. Overall occupancy rates for office and retail space in the Klang Valley softened last year. Office space occupancy in Kuala Lumpur and Selangor slipped marginally as supply growth slightly outpaced demand growth. Although no new supply was added, retail space occupancy in Kuala Lumpur slid 0.9% pts to 84% because of a 1% slippage in demand. Occupancy in Selangor improved 0.5% pts to 90.2% as supply actually fell by 1%, more than offsetting the 0.5% decline in demand. The average occupancy rate for hotels in KL fell from 71.4% to 68.8% while in Selangor, it plunged from 67% to 59.2%. • Outlook remains challenging. We expect transactions to fall and prices to ease in 2009, in line with the 3% real GDP contraction. Transactions could slump 35-50% in the worst-case scenario, matching the performance during the 1997/8 Asian financial crisis, while high-end condo prices could fall 30-40% from their peaks. There will also be downward pressure on occupancy and rental/room rates for office, retail and hotels as new supply will act as an overhang unless demand picks up. However, this is unlikely to happen as sentiment remains weak and developers have had to resort to attractive financing schemes to lure buyers. • Sector remains a TRADING BUY. Although the outlook for the sector remains difficult, the sector held up better than expected in 2008. This increases the odds of a manageable consolidation for the industry in 2009, rather than a steep decline. We maintain our TRADING BUY stance on the property sector for its leveraged play on the broader market and bombed-out valuations. SP Setia remains our preferred play on the sector for its excellent management, size and liquidity. Sector re-rating catalysts include 1) a broad market rebound in 2H and 2) attractive valuations. Figure 1: Sector comparisons Core ROE Target 3-yr EPS P/BV Div P/E (x) (x) yield (%) Bloomberg Price price Mkt cap CAGR (%) (Local) (Local) (US$ m) (%) ticker Recom. CY2009 CY2010 CY2009 CY2009 CY2009 Hunza Prop HPB MK TB 1.30 1.76 55 6.3 5.6 N/A 0.6 9.3 5.8 3.75 KLCC Property KLCC MK N 3.18 834 12.5 11.5 51.5 0.7 5.3 4.4 Mah Sing MSGB MK N 1.75 1.87 305 11.1 10.0 9.4 1.5 13.1 4.9 SP Setia SPSB MK TB 3.54 4.13 1,011 19.2 18.0 7.7 1.7 10.3 4.8 UM Land UML MK TB 1.05 1.98 71 28.5 8.6 N/A 0.3 1.1 2.4 Simple average 15.5 10.7 22.9 1.0 7.8 4.5 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy and TS = Trading Sell Source: Company, CIMB Research Please read carefully the important disclosures at the end of this publication.
    • Volumes transacted strong Much to our surprise, the recently released Property Market Report (PMR) 2008 revealed a very healthy clip for transacted volumes and values. This was the case, not just for residential properties, but for all sub-sectors. Transaction value notched a brisk rate of 14.5% while the number of transactions increased by 10%. In terms of value, development land and others recorded the strongest increase of 36%, with agriculture land coming in second at 23%. This could mean that developers were actively buying land bank for new projects. Residential properties again made up the bulk of transactions at 47% and recorded a very respectable 13% increase in value. Figure 2: Property transactions (RM m) 100,000 Residential Commercial Industrial Agriculture 90,000 Devmt & others 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: PMR, CIMB Research Figure 3: 2008 property transaction values by segment Devmt & others 16% Agriculture Residential 10% 46% Industrial 9% Commercial 19% Source: PMR, CIMB Research The robust increase in transaction values and volumes came as a positive surprise to us as we had expected it to be flat at best due to political uncertainty after the 8 Mar general elections and the global credit crunch which peaked in Oct. An even bigger surprise was the source of the growth in transaction values – it came not from the Klang Valley but from the most difficult market, Johor. Transaction values in Johor jumped 41% to nearly RM12bn, possibly due to the lure of the Iskandar development region. Penang transactions increased 11% while deals in the Klang Valley grew the slowest at 8%. Nonetheless, signs of rapid cooling were evident in 4Q as overall volume and value fell 18-20%. This should spill over into 2009. Figure 4: Transaction values by location (RM m) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 11,015.4 16,087.9 18,184.3 17,790.8 16,444.8 19,894.3 26,667.3 27,158.0 30,353.5 41,606.2 44,997.8 Klang Valley 4,570.2 5,687.9 6,087.7 5,654.7 6,298.8 6,689.1 10,628.8 7,852.5 6,937.1 8,452.8 11,905.8 Johor 2,578.1 2,592.6 3,275.8 3,632.7 3,433.0 3,863.2 5,653.2 5,502.1 5,489.5 6,554.4 7,276.9 Penang 9,747.7 10,054.3 11,648.1 11,556.6 12,466.7 12,988.3 17,014.2 16,269.1 18,745.6 20,520.5 24,158.4 Others Total 27,911.4 34,422.7 39,195.8 38,634.9 38,643.3 43,434.9 59,963.5 56,781.7 61,525.7 77,133.8 88,338.9 Source: CIMB estimates, PMR [2]
    • House prices appreciated further Less surprising was the decent rise in house prices for most of the country. Property prices were boosted by fears of inflation after the June price hikes for petrol, electricity and building materials. Overall house price appreciated 4.8% in 2008, matching the gain in 2007. Of the big-3 markets, Penang enjoyed the steepest appreciation of 10.4% while Klang Valley’s gain of 4.5% actually fell slightly behind the 5.4% inflation rate. Johor was an unexpected major letdown, with prices dipping 0.1% in 2008, which means that house prices in the state are relatively unchanged from 10 years ago despite the establishment of the Iskandar development corridor and the billions of ringgit of new investments going into Johor. Figure 5: House price indices Malaysia house price index KL house price index 300.0 Selangor house price index Klang Valley price index Johor price index Penang price index 250.0 200.0 150.0 100.0 50.0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: PMR, CIMB Research All the states in Malaysia save for Johor and Terengganu registered price appreciation in 2008. Surprisingly, Kuala Lumpur and Selangor saw modest price rises of around 4- 5% while northern states such as Perlis, Perak, Penang and Kedah enjoyed the highest gains in Peninsular Malaysia. The moderate price increase in the Klang Valley, which was in line with the country’s average, could be due to ample supply given that the Klang Valley is the area of focus for the most aggressive developers. Sabah’s house prices jumped 13.7%, the highest of any state in the country. Not surprisingly, many developers such as SP Setia and Mah Sing have either bought land bank or have voiced their intention to venture into the state. Figure 6: 2008 price change by state Sabah Perlis Perak Penang Kedah Saraw ak Malaysia Selangor Malacca K. Lumpur Kelantan N. Sembilan Pahang Johor Terengganu -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% Source: PMR, CIMB Research Almost across the board, house prices were lower in 4Q08 than in 3Q08. For the country as a whole, prices edged down 1.8% qoq in 4Q. The biggest fall came from high-rise properties, which registered a 2.9% qoq downtick. House prices fell 0.8% in Kuala Lumpur, 3.4% in Selangor, 1.7% in Johor and 6.1% in Penang on a quarterly basis in 4Q. The states that bucked the downtrend in 4Q were Malacca (+2.7%), Pahang (+1.3%), Kelantan (+2.5%), Perlis (7.2%) and Sarawak (4.1%). [3]
    • Commercial occupancies soften Overall occupancy rates for office and retail space in the Klang Valley softened last year. Office space occupancy in Kuala Lumpur and Selangor slipped marginally as supply growth of 2.2m sq ft outpaced demand growth of 1m sq ft. Although new supply growth was moderate, demand fell substantially from 5m sq ft in 2007. New demand amounted to 1m sq ft, short of the average new take-up of around 3.7m sq ft per annum. The weak demand could be due to the erosion of consumer confidence after the 8 Mar general elections and the global credit crunch. Overall occupancy for the Klang Valley slipped 0.9% pts to 84.7%. Figure 7: Klang Valley office space mil sq ft Occupancy Demand Supply Occupancy 120 120% 100 100% 80 80% 60 60% 40 40% 20 20% 0 0% 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 F Source: PMR, CIMB Research, Rahim & Co Research, BNM, Domain Properties, CH Williams Talhar & Wong and JLW Research In the case of retail space in KL, although there was no new supply, occupancy slid 0.9% pts to 84% because of a 1% or 0.2m sq ft slippage in demand. Occupancy in Selangor improved 0.5% pts to 90.2% as supply contracted 1% or 21,000 sq ft, more than offsetting the 0.5% or 9,000 sq ft decline in demand. The average occupancy rate for hotels in Kuala Lumpur fell from 71.4% to 68.8% while in Selangor, it plunged from 67% to 59.2%. As a result, Klang Valley occupancy fell from 71.6% to 65.7%. Figure 8: Kuala Lumpur retail space (mil sq f t) Occupancy 30.0 120.0% Demand Supply Occupancy 25.0 100.0% 20.0 80.0% 15.0 60.0% 10.0 40.0% 5.0 20.0% 0.0 0.0% F 89 91 93 95 97 99 01 03 05 07 09 Source: PMR, CIMB Research, Rahim & Co Research Figure 9: Klang Valley hotels Occupancy ('000 rooms) Supply Demand Occupancy 60.0 100.0% 50.0 80.0% 40.0 60.0% 30.0 40.0% 20.0 20.0% 10.0 0.0 0.0% 89 91 93 95 97 99 01 03 05 07 09 F Source: PMR, CIMB Research [4]
    • Outlook remains challenging We expect transactions to fall and prices to ease in 2009, in line with the projected 3% real GDP contraction. Transactions could fall 20-30% or as much as 35-50% in the worst-case scenario, matching the performance during the 1997/8 Asian financial crisis. However, most major developers have pushed out innovative financing schemes to lure buyers. Response has been mixed, with good response garnered by the likes of SP Setia (RM500m sales) and Mah Sing (RM170m sales) but lacklustre sales for many other developers. Figure 10: Change in property transaction value vs. real GDP growth 100.0% Residential Total Real GDP grow th 80.0% 60.0% 40.0% 20.0% 0.0% -20.0% 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 -40.0% -60.0% Source: Property Market Report, MOF, CIMB Research We also expect property prices to soften in 2009. Historically, the prices of residential properties in Malaysia and the Klang Valley moved in tandem with the economy but with a slight lag. During the 1997/8 Asian crisis, property prices pulled back more than the economy. However, we believe the fall in residential property prices, particularly for landed properties, will be less than the drop in the overall economy as property prices have lagged behind economic growth since 2001. The bubble in 2007 extended only to condos in specific locations such as KLCC and Mont’ Kiara. Prices in these two locations could fall 30-40% from their peak. Figure 11: Residential prices vs. real GDP growth 30.0% Malaysia house price index 25.0% Klang Valley price index 20.0% Real GDP grow th 15.0% 10.0% 5.0% 0.0% 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 -5.0% -10.0% -15.0% -20.0% Source: Property Market Report, MOF, CIMB Research There will also be downward pressure on occupancy and rental/room rates for office, retail and hotels as new supply will act as an overhang unless demand picks up. However, this is unlikely to happen as sentiment remains weak and even developers have had to resort to attractive financing schemes to lure buyers. Future supply remains significant as office space under construction and planning amounts to 29% of existing supply in the Klang Valley. For retail space, the potential increase is 22% while for hotels, it amounts to a massive 68%. However, in view of dampened outlook, supply under planning may not materialise. Supply under construction for office space in the Klang Valley amounts to a lower 12%, while for retail and hotels, it is 14% and 21%, respectively. [5]
    • Figure 12. Existing and future supply of properties Kuala Lumpur Selangor Klang Valley Johor Penang Others Malaysia Residential (units) Existing stock 1,597,518 646,869 325,330 1,623,433 4,193,150 389,122 1,208,396 Under construction 192,789 61,644 48,701 248,129 551,263 48,074 144,715 Future supply 367,344 208,913 86,341 562,536 1,225,134 91,231 276,113 Shop house (units) Existing stock 88,639 64,305 27,049 163,027 343,020 21,800 66,839 Under construction 13,918 7,887 3,387 20,838 46,030 2,144 11,774 Future supply 22,263 22,448 5,269 52,676 102,656 3,044 19,219 Office space (mil sq ft) Existing stock 104.0 9.4 11.3 40.0 164.6 67.0 37.0 Under construction 13.0 2.6 0.9 3.6 20.1 10.3 2.7 Future supply 30.3 8.9 1.4 5.2 45.8 23.0 7.2 Retail space (mil sq ft) Existing stock 45.1 12.4 12.7 28.4 98.6 22.9 22.2 Under construction 6.2 3.6 2.5 5.2 17.5 5.0 1.2 Future supply 10.1 12.7 3.4 11.8 38.0 10.1 3.2 Industrial (units) Existing stock 38,482 13,362 7,557 30,946 90,347 5,115 33,367 Under construction 2,633 496 263 3,770 7,162 31 2,602 Future supply 4,663 2,688 771 22,528 30,650 201 4,462 Hotel (rooms) Existing stock 43,667 14,061 12,308 86,311 156,347 30,152 13,515 Under construction 9,325 3,206 393 5,832 18,756 5,520 3,805 Future supply 29,661 3,753 1,618 18,195 53,227 25,856 3,805 Note: Future supply = under construction + planned supply Source: PMR, CIMB estimates As mentioned earlier, occupancy rates in the Klang Valley fell the sharpest for hotels, The trend is likely to continue in the near future as new supply under construction is significant while demand will be constrained by the high base effect due to the 2007/8 Visit Malaysia Year promotion and concerns over the swine flu outbreak. Occupancy rates for office space in the Klang Valley will also come under more pressure than retail as demand for retail space should be buoyed by relatively resilient consumer demand. Office space demand appears more a function of the economic environment as businesses are tightening budgets and making do with their existing space. Figure 13. Occupancy rates in KL/Klang Valley 110.0% Office Retail Hotel 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 Source: PMR, CIMB estimates Valuation and recommendation The key points we picked up from the 2008 Property Market Report are 1) property transactions across all sub-sectors held up much stronger than expected, 2) residential property prices continued their ascent and also performed better than expectations, and 3) occupancy rates for commercial properties including office space, retail space and hotel in the Klang Valley fared slightly worse than expected. Overall, the performance in 2008 was more resilient than expected, particularly for property developers. This increases the odds that 2009 may turn out to be a year of manageable consolidation for the sector rather than a steep decline. This would be [6]
    • positive for the sector. However, the PMR reinforces our belief that the property sector faces a difficult year. Transactions and prices should come under considerable pressure as 2008 can be considered a high-base year. Occupancy rates could also deteriorate as demand should remain lacklustre while new supply continues to come onstream. This may make investing in property investment companies such as REITs, KLCC Property, IGB Corp (IGB MK, Not Rated) and Sunway City (SCITY MK, Not Rated) a less rewarding proposition than initially expected. Despite the difficult fundamental outlook for the property sector, we continue to rate the sector a TRADING BUY. Property stocks have high betas and have been heavily sold down to steep discounts to RNAV. We recommend investing in selected property stocks as they provide investors a leveraged exposure to the stockmarket. We are more bullish about the stockmarket’s outlook for 2009 and expect the KLCI to end the year at 1,060 points. Re-rating catalysts for the property sector include 1) a broad market rebound in 2H09 which should boost the prices of the most depressed shares, 2) attractive valuations for most property stocks, and 3) lower GDP contraction in 2Q and 3Q after a steep plunge in 1Q. Figure 14: Discount to RNAV and NTA Share price RNAV/shr (Discount)/ NTA/shr (Discount)/ (RM) (RM) Premium (RM) Premium Hunza Prop 1.30 3.52 -63.1% 2.08 -37.5% KLCC Prop 3.20 5.00 -36.0% 3.97 -19.4% Mah Sing 1.75 1.66 5.4% 1.10 59.1% SP Setia 3.42 4.59 -25.5% 1.97 73.6% UM Land 1.05 3.98 -73.6% 3.38 -68.9% Average -38.6% 1.4% Source: CIMB estimates, companies SP Setia remains our top property pick for its size, liquidity and management. We believe there is a possibility of M&A activity as PNB owns 32.9% of the group and is looking to restructure its property portfolio after the earlier privatisations of Island & Peninsular, Pelangi and Petaling Garden. SP Setia has the management expertise, capacity and acumen to take on more land bank and will be able to help PNB unlock the hidden value of its assets more quickly. We also like fallen angels such as E&O (EAST MK; NR), YNH Property (YNHB MK; NR) and Sunrise (SUN MK; NR) as their share prices have fallen sharply despite their decent balance sheets and great land bank. Figure 15: Recommendation, target price and basis Recommendation Target price Target basis Hunza Prop Trading Buy 1.76 50% disc to RNAV KLCC Prop Neutral 3.75 25% disc to RNAV Mah Sing Neutral 1.87 20% disc to mkt P/E SP Setia Trading Buy 4.13 10% disc to RNAV UM Land Trading Buy 1.98 50% disc to RNAV Sector Trading Buy 10-50% disc to RNAV Source: CIMB estimates, companies [7]
    • DISCLAIMER This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. By accepting this report, the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions set forth below and agrees to be bound by the limitations contained herein (including the “Restrictions on Distributions” set out below). Any failure to comply with these limitations may constitute a violation of law. This publication is being supplied to you strictly on the basis that it will remain confidential. 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Further, CIMB, its affiliates and its related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report. The views expressed in this report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations(s) or view(s) in this report. CIMB prohibits the analyst(s) who prepared this research report from receiving any compensation, incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. However, the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations and the research personnel involved in the preparation of this report may also participate in the solicitation of the businesses as described above. In reviewing this research report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request. 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    • New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978. Singapore: This report is issued and distributed by CIMB-GK Research Pte Ltd (“CIMB-GKR”). Recipients of this report are to contact CIMB-GKR in Singapore in respect of any matters arising from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB-GKR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. 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RECOMMENDATION FRAMEWORK #1* STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS OUTPERFORM: The stock's total return is expected to exceed a relevant OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 12 months. expected to outperform the relevant primary market index over the next 12 months. NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant NEUTRAL: The industry, as defined by the analyst's coverage universe, is benchmark's total return. expected to perform in line with the relevant primary market index over the next 12 months. UNDERPERFORM: The stock's total return is expected to be below a relevant UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, benchmark's total return by 5% or more over the next 12 months. is expected to underperform the relevant primary market index over the next 12 months. TRADING BUY: The stock's total return is expected to exceed a relevant TRADING BUY: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 3 months. expected to outperform the relevant primary market index over the next 3 months. TRADING SELL: The stock's total return is expected to be below a relevant TRADING SELL: The industry, as defined by the analyst's coverage universe, benchmark's total return by 5% or more over the next 3 months. is expected to underperform the relevant primary market index over the next 3 months. * This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand and Jakarta Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. CIMB-GK Research Pte Ltd (Co. Reg. No. 198701620M) [9]
    • RECOMMENDATION FRAMEWORK #2 ** STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS OUTPERFORM: Expected positive total returns of 15% or more over the next OVERWEIGHT: The industry, as defined by the analyst's coverage universe, 12 months. has a high number of stocks that are expected to have total returns of +15% or better over the next 12 months. NEUTRAL: Expected total returns of between -15% and +15% over the next NEUTRAL: The industry, as defined by the analyst's coverage universe, has 12 months. either (i) an equal number of stocks that are expected to have total returns of +15% (or better) or -15% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +15% to -15%; both over the next 12 months. UNDERPERFORM: Expected negative total returns of 15% or more over the UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, next 12 months. has a high number of stocks that are expected to have total returns of -15% or worse over the next 12 months. TRADING BUY: Expected positive total returns of 15% or more over the next 3 TRADING BUY: The industry, as defined by the analyst's coverage universe, months. has a high number of stocks that are expected to have total returns of +15% or better over the next 3 months. TRADING SELL: Expected negative total returns of 15% or more over the next TRADING SELL: The industry, as defined by the analyst's coverage universe, 3 months. has a high number of stocks that are expected to have total returns of -15% or worse over the next 3 months. ** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. [ 10 ]