OPR Pause Spurring The Property Market

According to loan data released by Bank Negara Malaysia, total loan application for purchase of property in 2023 was higher at RM605.3b. The higher loan application was supported by stronger demand for property as the outlook for the property sector continued to improve. Besides, the pause in OPR hike by BNM since July 2023 had also underpinned recovery in buying interest on property. Meanwhile, loan application data off to a good start in January 2024 as it was higher at RM51b as buying sentiment on property remains healthy. Moving forward, MIDF says it maintains its view that demand for property would be stronger in CY24 as landscape for property sector is improving.

For the recently concluded earnings reporting season, four out of six property companies reported earnings that came in within expectations namely Sunway Berhad, Matrix Concepts, UOA Development and Mah Sing Group. Meanwhile, S P Setia reported earnings that came in above expectations as earnings in FY23 were lifted by land sales gain of ~RM110m and better margin. On the flip side, earnings of IOI Properties Group missed expectations as earnings contribution from China was weaker than expected. Meanwhile, property companies that concluded FY23 namely Sunway Berhad, S P Setia, Mah Sing Group and UOA Development reported higher new sales in FY23. Looking ahead, property companies are generally more optimistic about the outlook for FY24 by setting higher new sales targets.

Notably, Sunway Berhad targets to achieve new sales of RM2.6b in FY24 after recording new sales of RM2.4b in FY23.
Similarly, Mah Sing Group is setting higher new sales target of RM2.5b for FY24 after hitting new sales of RM2.26b in FY23. Meanwhile, S P Setia recorded bumper new sales of RM5.1b in FY23 due to land sales of RM836m in FY23. Excluding land sales, new property sales are estimated at RM4.2b in FY23 while management is setting a new sales target of RM4.4b for FY24.

The house remains POSITIVE on property sector as it remains sanguine on outlook for property companies. Buying sentiment on property is expected to remain healthy going forward as landscape for property sector is improving. New sales of property companies are improving which should translate into better earnings visibility going forward.

Top picks for the sector by MIDF are Mah Sing Group (BUY, TP: RM1.12) and Matrix Concepts (BUY, TP: RM1.91). The house likes Mah Sing for its quick turnaround strategy and high exposure to affordable homes via its M series projects. Besides, its growing presence in industrial property segment will support earnings growth in the medium to long term.

Meanwhile, it also likes Matrix Concepts as its new sales remain encouraging while landbank expansion in Labu will further buoy earnings growth. Besides, dividend yield of Matrix Concepts is attractive at 5.6%.

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