PETALING JAYA: The property sector is entering a long-term uptrend, driven by record-high investments in the country over the past two to three years.
According to UOB Kay Hian (UOBKH) Research, property transaction values are hitting all-time highs, the overhang is decreasing, and real estate investment is growing.
The research house has maintained an “overweight” call on the sector, which is trading at 0.8 times price to book ratio.
“Key drivers include expanding industrial development, which offer developers new growth opportunities beyond residential projects; and rising land values, boosted by special economic and financial zones, data centre demand and infrastructure projects,” UOBKH Research said.
Its top picks include laggards like IOI Properties Group Bhd
, mainly for its increased launches and large Johor landbank and Lagenda Properties Bhd, which has high margins and return on equity of more than 16%.
UOBKH Research also favoured developers with data centre exposure like Mah Sing Group Bhd and Eco World Development Group Bhd.
It expected property sales in the third quarter of the year to come in strong, on the back of more launches during the quarter.
The research house believes developers are on track to achieve their 2024 sales targets, having reached around 50% of their target in the first half of 2024.
“Based on our channel check, third quarter 2024 (3Q24) sales are expected to be strong on a few key launches.
“For example, Mah Sing launched five new M series projects in August and Sunway’s first Iskandar Puteri freehold landed properties sold out within two hours in September.
“UEM Sunrise Bhd’s new Iskandar Malaysia launches with a gross development value of RM500mil were fully taken up and S P Setia Bhd’s Atlas Melbourne debuted with 30% sold within the first week,” it said.
The research house added that most developers under its coverage are expected to record a stronger 3Q24, especially S P Setia Bhd and UEM Sunrise, on land sales contribution.
“We expect UEM Sunrise and S P Setia to post more than 100% growth year-on-year (y-o-y) in net profit on higher land sales contributions versus little to no land sales contribution in 3Q23.
“We expect Sunway Bhd to record about 60% y-o-y growth on lumpy recognition from Singapore project Parc Central (RM130mil to RM140mil contribution to net profit). Meanwhile, Mah Sing and Lagenda are expected to post 20% to 30% y-o-y growth on higher sales and progressive billings,” it said.
However, UOBKH Research expects Matrix’s results to remain flat y-o-y while Eco World’s 4Q24 results may show a single-digit decline y-o-y, but its full-year financial year results this year (FY24) are expected to see a 14% increase y-o-y.
The research house highlighted that IOI Properties is likely to see results weakness for its 1Q25 due to recognition of interest expense from its IOI Central Boulevard, having interest cost been capitalised previously.
Nevertheless, the research house expects IOI Properties’ earnings to catch up in the following quarters as occupancy increases. The property developer’s current occupancy stood at 60%, which was an increase from 50% in August.
UOBKH Research said IOI Properties targets to achieve about 70% occupancy for IOI Central Boulevard before the end of financial year in June 2025.
The research house estimates IOI Properties FY25 net profit to grow by 15% y-o-y.
