PETALING JAYA: Despite the challenging property outlook in the next 12 months, developers with overseas exposure are expected to do better in the medium term especially in China and Singapore, according to AmInvestment Bank Research (AmResearch).
“Sunway Bhd and IOI Properties are well positioned in this area and their property launches have been generally well received both locally and overseas,” it said in a report.
The research house is maintaining a “neutral” call view on the property sector given the challenging outlook.
“While most developers have achieved their new sales target, the numbers were lower year-on-year (yoy) whereby 9M19 sales were lower by 10% to 15% as compared with the previous year.”
AmResearch said that it does not expect surprises in earnings for the next 12 months, but the affordable segment remains to be the key focus for the sector.
“We expect the affordable segment to perform well, driven by resilient demand, especially from young professionals and families due to continued urbanisation. This is well reflected by the move by the majority of local property developers to focus on this segment,” it said.
In 2020, AmResearch anticipates a similar landbanking activities to the previous year, especially in small pocket of lands which have good locations such as close proximity to KL city centre, major expressways and the MRT/LRT.
It said high-rise development around these areas provide good connectivity hence convenience for home buyers. In 2019, Sunway and Mah Sing have applied such strategy in their landbanking activities.
The research house noted that Malaysian properties have been getting interest from Hong Kong residents due to protests in the region which began about six months ago.
“Malaysia is a good choice for Hong Kong people due to affordability, the Chinese/Cantonese culture, and English proficiency. Moreover, the lowering of foreign ownership threshold for condominiums and apartments to RM600,000 will increase the demand for local properties among foreigners.”
AmResearch foresees a 4% to 5% earnings growth for the property sector this year given the current sales figure, progress of construction and timing of revenue recognition, translating into a price-to-earnings ratio of 20 times.
“Companies such as Mah Sing, SP Setia, MRCB, Ecoworld and Titijaya Land have many projects still in their early stages, hence we do not expect strong revenue recognition in the next 12 months.”
Meanwhile, the research house expects the REIT sector to remain stable in the short to medium term, especially shopping malls.”
“Pavilion REIT and Sunway REIT are still enjoying high occupancy rates in their shopping malls. We believe the high occupancy rates are also due to strong management and brand names of the REITs, in addition to shopping complexes becoming one-stop centres for the Malaysian lifestyle providing F&B and entertainment options.”
YTL REIT is AmResearch’s pick for the sector as it is a hospitality REIT with exposure in the Australian market that continues to grow and at the same time has master leases on properties in both Malaysia and Japan that provide steady incomes.
