Why KWG's 'high-end image' dragged its stock down

It shifted its product mix.

According to Maybank Kim Eng, they believe KWG’s high-end image caused the stock to underperform YTD, in addition to considerable first-tier city exposure. 

However, the firm notes that Guangzhou constitutes 40% of KWG’s attributable landbank by GFA, and they are more positive on Guangzhou than Beijing this year because of less strict policy measures in Guangzhou as well as reasonable ASPs compared to some other first- and upper second-tier cities.

Here's more from Maybank Kim Eng:

Based on our channel checks, KWG has higher saleable resources in May and June, with new project launch and new batches from existing projects.

Also, KWG has shifted its product mix to include more small-sized units and we also like some non-residential saleable resources this year (estimated 48% of its saleable resources would come from units below 90 sq m).

Non-residential saleable resources are planned to constitute 42% of total saleable resources in 2013. KWG management guided for May to be a relatively high sales season, with new batches from existing projects.

We also expect Guangzhou Biological Island Phase 1 to launch some small-sized serviced apartments (commercial) for sale in 2Q. Guangzhou Liede Village’s office portion (JV project with GZ R&F and SHKP) is also slated for launch in early 3Q.