Yoong: The slowdown in data centre investments will be mitigated by the popularity of Malaysia as the fourth most popular destination in the world in 2024 for high-net-worth Chinese buyers interested in buying homes worth US$5mil or more.
PETALING JAYA: Following a solid earnings season in the final quarter of last year (4Q24), analysts and industry experts remain upbeat about the prospects of property companies in 1Q25.
Seasoned investor Ian Yoong believes earnings for property companies should grow by 8% to 12% in 1Q25, mainly driven by land sales in 4Q24.
“The slowdown in data centre investments will be mitigated by the popularity of Malaysia as the fourth most popular destination in the world in 2024 for high-net-worth Chinese buyers interested in buying homes worth US$5mil or more.
“This is a precursor for a surge in demand for high end residential properties in Malaysia,” he told StarBiz.
Additionally, Yoong said he expects growth of between 4% and 6% in property sales for 2025.
“The growth will come from the residential and industrial sub-sectors,” he said.
Meanwhile, RHB Investment Bank analyst Loong Kok Wen believes that property developers will likely see weaker quarter-on-quarter earnings in 1Q25, adding however that this was not unusual.
“Earnings typically tend to be weaker in the first quarter of the year, but it’s not something to be surprised about.
“In the first quarter, festive holidays such as Chinese New Year and Hari Raya tend to disrupt the construction process, creating more breaks in between.”
As such, Loong noted that many developers tend to roll out launches towards the tail end of the second quarter, which leads to better sales performances in the second half of the year, rather than in the first half.
Loong has projected property sales to grow modestly between 3% and 5% this year, following a 3% year-on-year (y-o-y) rise last year.
“This is the fourth consecutive year that aggregate sales numbers have stayed above the RM20bil mark, indicating that most developers have been able to sustain their strong sales since 2021.”
Commenting on the global uncertainties at the moment, Loong admits that tariff policies by the United States will have an impact on investor sentiment.
“The uncertainties could affect sentiment and business decisions, especially players with industrial developments.
“Many multinational companies may hold back until they see better clarity. Instead of doing it next month, they may push it to the next quarter.”
While Loong believes that the residential sub-sector will be the least affected, she pointed out that the ongoing uncertainty could affect sentiment and ultimately, property transactions.
“But I don’t think we will see a slump, as we are not in an economic crisis.”
Meanwhile, UOB Kay Hian Research (UOBKH Research) noted in a recent report that several developers had guided for higher sales targets this year during their 4Q24 results briefings.
“Overall, we forecast a sector revenue growth of 8.4% y-o-y, due to higher sales and progressive billings and sector earnings growth of 9.1% y-o-y, due to higher-margin industrial land sales.
“Within our coverage, most companies exceeded their sales targets last year, with S P Setia Bhd, Sunway Bhd
and UEM Sunrise Bhd outperforming targets by 14% to 42%, while Mah Sing Group Bhd and Lagenda Properties Bhd slightly behind targets due to delayed project launches.”
Among developers with different financial-year ends, UOBKH Research said Eco World Development Group Bhd was ahead of its target and Matrix Concepts Holdings Bhd on track.
Yoong meanwhile said aggregate property sales in 2024 was firm at 3% y-o-y.
“This was reflected in the results of property companies in the final quarter of 2024, which, in my view, were within expectations.”
Going forward, UOBKH Research said it expects robust industrial sales ahead.
“The sector is set for a strong industrial growth this year, with IOI Properties Group Bhd (IOIProp) targeting to secure at least one data centre land sale by June 25.
“Meanwhile, S P Setia has guided for RM200mil to RM300mil in industrial land sales and Mah Sing finalising a 42-acre data centre land sale in the Meridin East development in Johor in 2Q25, while reaching final terms with Bridge Data Centre by end-May 2025.”
Based on its estimates, UOBKH Research said it believes that industrial land sales earnings recognition could be around RM600mil this year and RM900mil next year, accounting for 15% and 20% of sector earnings estimates, respectively.
“Despite near-term market volatility, we reiterate our view that the property sector is entering a long-term uptrend, underpinned by record-high investments in Malaysia over the past two-to-three years.
“We prefer developers with strong earnings visibility, particularly Eco World, which is well-positioned to capitalise on the quicker growth in the industrial and commercial segments.”
The research house said it also liked laggard developers with re-rating potential, such as Mah Sing, with catalysts from the finalisation of its data centre deal and a potential land acquisition in Johor, and IOIProp from its data centre land sale and planned real estate investment trust listing in the second half of this year.
