RHB Investment Bank maintains ‘overweight’ call on property sector

RHB Investment Bank has maintained an ‘overweight’ call on the property sector with top picks UEM Sunrise, IOI Properties Group Bhd (IOIPG) and Eastern & Oriental (E&O).

It expects the property sector to continue to be driven by positive news flow on potential infrastructure projects, active land transactions and the influx of investments, especially in the data centre, green energy and manufacturing sectors.

“We expect the property sector to continue to be driven by positive news flow on potential infrastructure developments such as the Kuala Lumpur-Singapore High-Speed Rail (HSR), Johor Bahru light rail transit (LRT) and Penang LRT, active land transactions (particularly in Iskandar Malaysia) and the influx of foreign direct investments and expansion by local manufacturing players,“it said.

RHB Investment Bank said developers with sizeable landbank and industrial segment exposure should see greater benefits from infrastructure developments and rising investment flows.

“Pump priming across the Klang Valley, Iskandar Malaysia and Penang region should lift the sector’s overall valuation,“it added.

The property sector has appreciated about 18% year to date.

The research house noted that most developers are turning more optimistic with 10-15% higher sales targets in the 2024 financial year (FY2024).

“Most major developers – except for UEM Sunrise Bhd, Sime Darby Property Bhd and SP Setia Bhd – are guiding for sales targets that are 10-15% higher year-on-year (y-o-y) for FY2024, with most turning more positive on this year’s property market outlook,“the report said.

“Although UEM Sunrise has set a lower sales target of only RM1 billion versus the RM2.1 billion achieved in FY2023, we think the company may have something more exciting ahead, as management has just revealed its revised masterplan for Gerbang Nusajaya, which saw a significantly higher proportion of industrial development,“it said.

According to RHB Investment Bank, the aggregate property sales in the fourth quarter of 2023 were flat y-o-y and down by only 5% quarter-on-quarter due to stronger sales in the second and third quarters.

On a full-year basis, aggregate property sales rose 19% y-o-y to RM19 billion versus RM16 billion in 2022, it said.

“IOIPG, Mah Sing Group Bhd and Sunway Group saw encouraging growth in property sales from the Johor region last year,“the report said.

“This reaffirms our bullish view on the property sector. Demand is expected to pick up strongly as interest rates stabilise and economic growth improves, supported by favourable government policies, such as the easing requirements for Malaysia My Second Home programme and new infrastructure projects concentrated in Johor,“it said. – Bernama