MIDF Research said total loan applications for the purchase of property grew 3.2% year-on-year to RM58.5bil in May 2024.
PETALING JAYA: The earnings outlook for developers appears bright, based on the positive loan application data signals, according to MIDF Research.
Citing data released by Bank Negara, MIDF Research said total loan applications for the purchase of property grew 3.2% year-on-year (y-o-y) to RM58.5bil in May 2024, following growth of 15% y-o-y in April 2024.
On a monthly basis, total loan applications in May 2024 grew 10.5%, reaching the highest level since April 2023.
Cumulatively, total loan applications in the first five months were higher at RM254.5bil (up 3.1% y-o-y), which shows stronger buying interest on property.
MIDF Research believes the stronger buying interest was supported by lower residential overhang in Malaysia, stable house price and improving economic outlook for Malaysia.
It remained positive on the property sector, given the positive loan application numbers.
It pointed out that the performance of the KL Property Index was decent in the first half of the year with gains of 25%, outperforming the FBM KLCI’s gains of 9.3%.
“The strong performance of property counters was mainly due to the recovery in the property sector in Malaysia, which was supported by the status quo of the overnight policy rate (OPR) at 3% and stronger buying interest on property amid recovery in the economy,” the research house added.
It said the sector was also buoyed by positive news flow on data centre ventures by property companies, the establishment of the Johor-Singapore Special Economic Zone and the ongoing infrastructure projects, namely, the Johor Baru-Singapore Rapid Transit System Link and Penang Light Rail Transit, which also boosted sentiment on property counters.
Meanwhile, the top five performers of property counters in the first half of 2024 were WMG Holdings Bhd
(up 320%), Sime Darby Property Bhd (135%), Mah Sing Group Bhd (118%), PTT Synergy Group Bhd (104%) and Pegasus Heights Bhd (100%).
MIDF Research’s top picks for the sector are Mah Sing, with a target price of RM1.97, and Matrix Concepts Holdings Bhd, with a target price of RM2.05.
It favours Mah Sing due to the group’s high exposure to the affordable residential segment, which is supported by strong buying demand.
“Mah Sing continues to expand its landbank on the back of a low net gearing of 0.06 times, which should continue to sustain its new sales and earnings growth. Besides, the venture into data centres will provide recurring income in the long term,” it said.
The research house is also positive on Matrix Concepts due to the resilient sales from the latter’s Bandar Sri Sendayan township in Seremban, which is supported by demand for affordable landed houses.
“Besides, Matrix Concepts continues to expand its landbank in Labu, which will spur earnings growth beyond financial year 2027. In addition, its dividend yield is attractive, estimated at 5.7%,” it added.
