AmInvestment Bank notes that the improvement in the property market this year is an added boon for developers.
THE recently concluded financial results season saw many developers reporting earnings that were largely within expectations, with several already on track to meet their year-end sales targets.
“Their steady performance this year can be attributed to the improving market environment, better consumer sentiment and well-planned strategies to ensure positive and sustainable business growth,” says an analyst.
“Having the right product mix and focusing on segments where demand is still strong have also helped contribute to developers’ solid earnings,” he adds.
Among the companies that are set to meet, if not surpass their current financial year target, is Sime Darby Property Bhd
.
RHB Research property analyst Loong Kok Wen says that while Sime Darby Property has revised up its sales target from RM2.5bil to RM2.7bil earlier this year, sales momentum for the group has remained strong.
As such, she expects Sime Darby Property to surpass its new target.
“The company has already launched RM3.2bil worth of products in the first nine months of 2023 and it will roll out RM791mil worth of new projects in the fourth quarter of this year.
“We raise our financial year 2023 to 2025 earnings by 25% to 27%, in view of the strong sales momentum, while construction activities are expected to normalise at the current level. Unbilled sales stayed relatively unchanged at RM3.7bil, compared with RM3.8bil as at the second quarter of 2023,” Loong says in a recent research note.
Normalising activities
Hong Leong Investment Bank (HLIB) Research, meanwhile, says that Sime Darby Property is well-positioned to capture market demand, given its exposure to residential landed homes within the Klang Valley, as well as the industrial segment.
As land becomes increasingly scarce in the Klang Valley, residential landed homes should continue to enjoy robust demand, while landed home prices are also expected to appreciate due to scarcity premium.
“Furthermore, the robust industrial demand should sustain, given the multi-year realisation of previously committed foreign direct investment (FDI).”
HLIB Research says that the prospects for FDI remain bright as global manufacturers look to re-shore their production facilities, given rising geopolitical tensions.
Another company that looks set to achieve its sales target for this year is Mah Sing Group Bhd.
UOB Kay Hian (UOBKH) Research notes that the group has achieved 82% of its full-year target of RM2.2bil.
“Mah Sing recorded RM1.8bil (a 14% year-on-year increase) in property sales for the first nine months of 2023, driven by its M series products, namely, M Astra, M Senyum and M Vertica.
“Bookings on hand were also strong at around RM400mil (with a conversion rate of around 60%).”
Leveraging on affordable housing
Going forward, UOBKH Research believes that Mah Sing will likely see higher sales targets and launches in 2024, given the group’s affordable range of homes.
“In view of strong and resilient demand for affordable houses, we expect Mah Sing to continue to focus on its M-Series products.
“We remain optimistic that its M-Series products will continue to gain traction due to the strategic locations and affordable price points, driving higher sales targets next year.”
The research house explains that most of Mah Sing’s products are priced below RM500,000, adding however that some are in the RM500,000 to RM700,000 price range.
“We estimate the 2024 sales target to be around RM2.5bil. We understand that 2024 launches will be largely centred around the Klang Valley and its township in Johor, Meridin East.
“For Johor, the launches will be landed houses priced between RM330,000 and RM670,000, which we think will be well-received.”
CGS-CIMB Research also believes that sales momentum for Mah Sing’s M-Series products will remain strong, given its affordable price points of below RM500,000.
“Land acquisition would continue to be one of the key strategies, according to management, supported by the group’s strong balance sheet position.”
Meanwhile, Apex Securities says it expects demand for housing, particularly units targeted for the B40 group, to remain robust.
This, the research house says, is set to benefit companies such as affordable housing specialist Lagenda Properties Bhd.
“The target to build 500,000 affordable homes by the end of the 12th Malaysia Plan highlights the government’s strong commitment to tackle the housing affordability issue in Malaysia.”
Going forward, Apex Securities says it expects Lagenda’s landbank of approximately 4,700 acres (which carries an estimated gross development value of RM12bil) will sustain long-term revenue visibility.
“We also gather that the group has successfully transitioned its projects located at Teluk Intan and Kedah, which will ramp up construction progress, moving forward.”
Boon for developers
Separately, AmInvestment Bank notes that the improvement in the property market this year, which in turn has spurred construction activities, is an added boon for developers.
This, the research house says, will help to spur future launches for companies.
In the case of Lagenda, the research house says the company’s sales in the first quarter of 2024 is expected to be boosted by more aggressive launches.
AmInvestment Bank says the company has more than 3,900 units to be launched in the first quarter of 2024, as well as maiden launches of townships in Penor, Bernam Jaya and Kulai.
Additionally, analysts are also optimistic about Matrix Concepts Holdings Bhd’s latest performance.
The general consensus is that the group is expected to see positive earnings growth going forward, underpinned by its landbank expansion and strong sales momentum.
MIDF Research in a report says it remains “sanguine” on Matrix Concepts’ earnings prospects, due to a pick-up in progress billing.
“The balance sheet of Matrix Concepts is healthy at a net cash position, which should support dividend payouts.
“The dividend yield of Matrix Concepts is attractive, estimated at 6%.
“Meanwhile, landbank expansion in Labu will support earnings growth in the longer term.”
Construction progress
RHB Research, meanwhile, says it is raising its financial year 2024 (FY24) to FY26 earnings forecasts for Matrix Concepts by 2% and 5%, as construction progress is expected to normalise.
“Unbilled sales slipped to RM1.3bil, from RM1.4bil as at the first quarter of FY23.
“Note that Matrix Concepts sold an industrial property for RM48mil in October 2023 and this disposal is expected to bring an estimated gain of about RM20mil.”
HLIB Research notes that the group is accelerating its launches with FY24’s total launch pipeline amounting to RM1.9bil.
“The strong launch pipeline should help to sustain its sales momentum.
“Looking ahead, as landed home supply in the Klang Valley area becomes increasingly scarce and pricey, buyers will gradually look further away from the city centre for landed homes.”
