CGS-CIMB sees a strong revenue and earnings trajectory for property developers this year banking on their optimism over higher sales underpinned by a relatively strong domestic economy. It believes improving mortgage loan approval-to-application ratio and labour supply imply a better outlook and clarity to the sector.
CGS-CIMB said larger players under its coverage continue to set high sales targets, with Mah Sing Group Bhd guided sales for financial year 2023 (FY2023) amounting to RM2.2 billion versus achieved sales of RM2.12 billion in FY2022 and SP Setia Bhd at RM4.2 billion (RM4.11 billion).
Sime Darby Property Bhd targets a more moderate RM2.3 billion sales after achieving RM3.7 billion in FY2022. Nevertheless, the developer has consistently surpassed its own sales target over the past five years. CGS-CIMB said developers under its coverage have high unbilled sales with a total of RM20 billion in the first quarter(1Q 2023), it said in a note.
Total property sales in 2022 jumped 29 per cent to 389,000 units mainly attributed to a 22 per cent growth in the residential segment and a 46 per cent growth in commercial properties.
“We believe an additional kicker to earnings could potentially come from stabilising overall raw material costs; for example, there has been a correction in steel prices by 15 per cent from 2022’s peak in April 2022, although cement prices have trended higher by 11 per cent from 2022 levels to RM410 per tonne as of May 2023,” the research house noted.
In addition, the average mortgage loan approval-to-application ratio improved to 0.41x over the past year (April 22-March 23), compared to 0.37x over the same period the year before. At 3 per cent, the overnight policy rate has reverted to pre-pandemic levels, suggesting a resilient domestic economy.
