High-end value trap; Downgrade Wheelock Properties, Wing Tai and Ho Bee to HOLD. The demand-supply dynamics are most favourable in the mass market segment and least favourable in the high-end segment. Also, the lower transaction quantum commitment requirement in the mass market segment appeals to opportunistic buyers. As a result, the rising likelihood of a prolonged economic slowdown further diminishes the visibility of a recovery in the high-end segment to a much greater extent compared to the mass market segment. Even though high-end property stocks are trading at attractive discounts to their respective RNAVs, these stocks could continue to trade at deep discounts for a prolonged period. The lower liquidity adds to the concerns. Consequently, we downgrade the high-end stocks: Wheelock Properties (Fair/S$1.00), Wing Tai (Fair/S$0.75) and Ho Bee (Fair/S$0.35) from BUY to HOLD, applying steeper discounts to their respective RNAVs.

Downgrade SC Global and GuocoLand to SELL. We view SC Global and GuocoLand as having a moderate/high risk profile due to their high gearing levels compared to other developers. The risk for next year remains although SC Global is able to meet its interest servicing and refinancing requirements this year. While GuocoLand has a strong parent, the litigation involvement over the Beijing Dong Zhi Men site is expected to be a drag on its share price.

Consequently, we downgrade SC Global (Fair/S$0.30) and GuocoLand (Fair/S$0.80) from HOLD to SELL, applying steeper discounts to their respective RNAVs.

Prefer exposure to quality, deep-value and diversified stocks. Property stocks are deep in value with implied physical property prices at 2004 levels while the strong take-up rates for recent project launches suggest base formation at the 2006 levels. More such launches could potentially act as a re-rating catalyst for the sector. We believe the best way to benefit from the anticipated revival in property stock prices is via exposure to quality, deep-value and diversified property stocks.