UBS cuts forecasts for 3 developers

UBS AG cut its forecasts for earnings and price targets for three Malaysian property companies, including SP Setia Bhd, as real-estate sales declined and economic growth is expected to slow next year.

“We have seen three declines in Malaysian property sales over the past decade and this coincided with a sharp fall in” gross domestic product growth, Colbert Nocom, an analyst at UBS, wrote in a report today.

Stock price targets and profit forecasts were cut “to reflect our view of slower economic growth in the second half of 2008 and full-year 2009.”

UBS slashed profit forecasts at Malaysian real-estate companies it covers by 24 per cent as property sales will probably fall 5 per cent next year. Southeast Asia’s third-biggest economy may expand between 5 per cent and 5.5 per cent this year, slowing to between 4 per cent and 5 per cent next year, according to the central bank.

SP Setia, Malaysia’s biggest developer, was cut to “sell” from “neutral,” by UBS, which estimated the company’s earnings will drop 26 per cent in 2008 and 3 per cent in 2009.

Nocom also lowered his price estimate for SP Setia to RM3.00 (85 US cents) from RM3.20. He cut IGB Corp’s target to RM1.60 from RM1.75 and UEM World Bhd’s to RM2.60 from RM3.80.

SP Setia added 2 per cent to RM3.24 on the Malaysian stock exchange at 10.30 am in Kuala Lumpur, paring its decline this year to 35 per cent. IGB was unchanged at RM1.26, down 44 per cent for the year. UEM, which has tumbled 48 per cent since January 1, was unchanged at RM2.04.

By Bloomberg