PROPERTY counters are basking in the limelight again, with investors seeing them as good investment opportunities after the good sales and strong earnings posted by some of the property groups, especially those focusing on residential development.
Since January, the KLSE property index has risen by a whopping 30% against the Composite Index's (CI) 16%. The property index closed at 701, while the CI at 740 respectively on Friday. This was a spectacular turnaround from last year when the property sub-sector remained largely lacklustre.
Fund managers and investment analysts are generally bullish of the sector's outlook in the coming quarters, although some have cautioned that there could still be an over-supply situation.
Generally, they view that the government's economic package has greatly benefited the residential sector. They said housing demand had created sustainable demand for the industry at an annual growth rate of about 20%.
The main catalysts for a buoyant property sector, such as the improving economy, healthy job and stock markets, and low mortgage rates, are all in place.
These positive factors, combined with the country’s young population, rapid urbanisation and high savings rate, will continue to drive housing demand.
They also pointed out that the improving stock market sentiment would usually spill over to more property buying, hence fuelling the prospects of property stocks.
TA Unit Trust Management Bhd general manager (investment) Mohd Hasnul Ismar said the unit trust firm was looking to increase its weighting on property stocks to between 5% and 7% of its total portfolio.
“Overall, we are quite positive on the property sector, and expect it to be one of the theme plays such as the oil and gas stocks.
HSBC Research investment analyst David Ng said that since the economic package, which makes home ownership easily accessible to the people, the outlook for the property sector has been very positive.
“Most of the good property stocks are traded very close to their net asset value and have posted strong earnings growth of between 25% and 30% in the last quarter.
“Their property sales have also shown very strong take-up rate,” he told StarBiz.
Ng said the demographics factor also helped greatly as Malaysia's young population continued to record a steady growth of about 2% per annum, and 8.2 persons per home which showed that home ownership was still low.
A senior analyst of a local brokerage said property counters had shown a good run-up in the last three months, with some outperforming banking stocks.
“Property sales have been pretty robust and many of the buyers were looking to upgrade to more sophisticated lifestyle neighbourhoods.
“The waiver of real property gains tax (RPGT) has spurred this sector of the market as people are capitalising on it to dispose of their existing property and move up the residential ladder,” he said.
KLCS Asset Management executive director Connie Ong said the property sector was one of the cheapest sectors in the stock market, where many of the property stocks were trading well below their revised net asset value (RNAV).
She also pointed out that many of the property companies were trading at a low single-digit price to earnings (PE) multiples, while the larger ones were traded below the broader stock market PE of 14 to 15 times.
Despite the cheap valuations, Ong said many fund managers were wary of the fact that the property sector was still in an oversupply situation.
She added that KLCS Asset Management had a neutral recommendation on the sector, and that it was particularly interested in property firms that had strategic landbanks in the Klang Valley.
Analysts also pointed out that property developers, seeing plenty of opportunities and room for growth in the local property industry, were beginning to embark on an expansion trail to acquire more landbank, especially in strategic locations in the Klang Valley.
However, a seasoned fund manager cautioned that more land deals could also potentially mean more forthcoming property launches, which could further strain the excess supply in the industry.
“Basically, property development nowadays is very much dependent on location. A good location like Klang Valley sells, and it is precisely this segment of property developers that is doing well.
“But with more mega townships coming onstream in the coming quarters, there are concerns that perhaps that even this segment could run into saturation in two to three years' time,'' the fund manager said, adding that he had a preference towards smaller-cap property firms over the bigger players.
Focus on selected property countersSP Setia, Sunrise, IGB Corp, IOI Properties, Glomac, MK Land, LBS Bina, Hunza