Stronger earnings seen for Malaysia property companies: MIDF Research
MALAYSIAN property companies are expected to post better earnings this year as construction activities normalise.
The sector is also expected to see recovery in property demand, driven by higher loan applications.
Malaysian Industrial Development Finance Bhd (MIDF) Research said the higher sales posted by property companies last year would likely lead to higher earnings in 2022.
“Total loans approved for purchase of property was higher at 136.3 million ringgit [$32.6 million] in 2021.
“This was in line with the higher loan applications for the purchase of property,” it said. “That has translated into higher sales for property companies.”
However, MIDF Research noted that new property sales outlook would likely be “flattish to slightly positive” this year.
This is because the stronger buying interest from the easing of movement restrictions would partially be offset by the discontinuation of the Home Ownership Campaign.
Another key challenge that remains for property developers is the conversion of bookings into sales.
This is due to stringent bank requirements, said MIDF Research.
“The percentage of total approved loans over total applied loans for the purchase of property remained low at around 35 per cent in 2020 and 2021,” it said. “Hence, we expect the low conversion rate to remain a challenge for property developers in the near term.”
As such, MIDF Research is keeping a “neutral” recommendation on the property sector, with “buy” calls for Mah Sing Group Bhd and IOI Properties Group Bhd.
“We are positive on Mah Sing due to its positive new sales outlook which is underpinned by a strategy of creating affordable range properties.
“Also, the earnings outlook is supported by the full-year contribution from the glove manufacturing division.
“New sales prospect of IOI Properties Group will continue to be driven by launches of projects in Malaysia and China,” it explained.
Besides that, MIDF Research said the Kuala Lumpur (KL) Property Index underperformed the Financial Times Stock Exchange Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) last year by recording a decline of 4.22 per cent against the FBM KLCI’s decline of 3.67 per cent in 2021.
“The underperformance of the KL Property Index was mainly attributed to the higher beta nature of property companies amid the uncertain economic outlook in 2021 and Covid-19 pandemic,” it added.