HLIB reiterates ‘neutral’ rating on property sector

KUALA LUMPUR: Hong Leong Investment Bank ( HLIB) has reiterated its “neutral” rating on the property sector in the absence of near-term catalysts despite some bottoming signs.

In a research note today, HLIB said supported by a stronger economy, albeit the expectation of a rise in the overnight policy rate, interest may return to the sector given the cheap valuation and rising appetite on a domestic growth upcycle.

HLIB noted incoming supply had decelerated and the affordable theme will continue with house prices capped by affordability.

“The affordable theme will remain for years to come, with developers scaling down launches and recalibrating portfolio to suit the dynamic market.

“Affordable properties in proper planned townships and strategic locations will continue to see sustained demand,” it said.

The research firm’s top picks were Sunway Bhd, SP Setia Bhd and MB World Group.

It recommended a buy call on Sunway with a target price ( TP) of RM2.25, given its deep value stock with mature investment properties, having a diversified income stream and declassification from the property sector, as well as underappreciated trading and healthcare businesses.

For SP Setia ( Buy, TP: RM4.00), HLIB said the completion of an accretive acquisition of I& P Group would cushion its financial year 2018 earnings and drive it to become the largest pure property player.

Meanwhile, for MB World ( Buy, TP: RM2.75), HLIB said the company was well positioned to ride on first mover advantage to capture the spillover effect from growth in the Petronas Refinery and Petrochemical Integrated Development ( Rapid) project in Johor. — Bernama