PETALING JAYA: The property sector is expected to remain resilient through the rest of this year, underpinned by healthy earnings visibility.
Robust project pipelines and sustained demand from homebuyers are set to provide further support to the sector’s outlook.
As such, BIMB Research maintained its “overweight” call on the property sector, citing supportive policy measures, improving household income and continued infrastructure development as key drivers for growth.
“We continue to expect Malaysia’s property market to remain resilient, supported by affordable housing measures, firmer household income, sustained industrial demand and progress in key infrastructure projects such as the Penang light rail transit and the Johor Baru-Singapore rail transit system link,” the brokerage said.
It noted that sector earnings visibility remains strong, supported by sizeable unbilled sales, active launches and growing recurring income streams, although profitability trends are becoming increasingly divergent among developers.
“Near-term earnings should improve as construction activity normalises after the festive period, particularly for Lagenda Properties Bhd
, Mah Sing Group Bhd and Sime Darby Property Bhd (SimeProp),” it said.
BIMB Research added that IOI Properties Group Bhd (IOIPG) would continue to benefit from stronger property investment income and selective land monetisation efforts.
Within its coverage universe, the research house said Lagenda, Mah Sing, SimeProp and IOIPG delivered results that were broadly in line with expectations during the latest reporting season.
“Lagenda and Mah Sing showed resilient margin delivery despite softer revenue recognition, while SimeProp’s reported earnings were supported by a data centre fair value gain.
“IOIPG’s core earnings were stronger, supported by property development recognition, land monetisation and a larger recurring income base,” it said.
However, performance was less encouraging for Matrix Concepts Holdings Bhd and Skyworld Development Bhd.
According to BIMB Research, Matrix fell short of expectations despite recording stronger revenue, as earnings conversion was affected by project mix, cost reclassification and a higher effective tax rate.
SkyWorld’s earnings also missed forecasts amid margin compression, higher financing costs, bad debt write-offs and elevated tax expenses.
The research house cautioned that margin performance is emerging as the key differentiator among developers.
“Developers with stronger cost discipline, better sales conversion and more advanced projects should be better positioned to defend earnings.
“By contrast, developers with higher exposure to lower margin projects, early-stage construction, financing cost pressure and elevated tax expense may see slower earnings recovery,” it said.
Looking ahead, BIMB Research said investors should closely track construction progress, booking-to-sale and purchase agreement conversion rates, loan approvals, project take-up rates, margin sustainability and financing cost management. “We expect earnings visibility to remain intact, but stock selection should remain focused on names with clearer margin resilience and balance sheet flexibility,” it said.
The research house continues to favour developers with strong execution capabilities, proven sales delivery, strategic landbanks, healthy balance sheets and manageable holding costs.
Its top buy-rated picks are Mah Sing with a target price (TP) of RM1.85, SimeProp (RM1.79), Lagenda (RM1.67), Matrix (RM1.49) and SkyWorld (RM0.62).
It maintained a “hold” recommendation on IOIPG with a TP of RM4.10, noting that recent share price gains have reduced valuation upside despite positive prospects from recurring income growth and potential real estate investment trust monetisation.
Meanwhile, one analyst, who had a “neutral” take on Malaysia’s property sector, said the sector would likely continue to benefit from structural demand drivers and a healthy development pipeline.
However, he noted, that investors are becoming more selective as profitability trends diverge across developers.
“While overall market conditions remain supportive, execution and margin management are likely to play a bigger role in determining which property companies can sustain earnings growth over the coming quarters,” he explained.
