Kenanga Investment Bank (Kenanga) recently conducted a field trip to Johor Bahru to get a better sense of the property landscape there, visiting Sa.young project by ECOWLD (UP; TP: RM1.20), UMCity Medini Lakeside project by UMLand, Princess Cove by R&F Development, as well as Mid Valley Southkey Mall by IGBB (Not Rated).
Kenanga, in its Property Sector Update today (May 6) said generally, they sense a promising appetite for properties in Johor Bahru, fuelled by its economic potential and the anticipated surge in demand from the RTS spillover.
As a percentage of total GDV, the following developers have the largest exposure in Johor: UEMS (Not-Rated; 70%), ECOWLD (26%), MAHSING (UP; TP: RM1.11) (19%), and SPSETIA (UP; TP: RM0.80) (16%).
Kenanga’s observation of various property developments in Johor unveiled perspectives of the evolving real estate landscape. While promising attributes like attractive pricing, high occupancy rates, and strategic proximity to future infrastructure such as the RTS and HSR lines were evident, challenges such as limited ground public transportation accessibility, potential road congestion, and concerns regarding surrounding development maintenance also surfaced.
These complexities highlight the diverse nature of Johor’s property market, where the combination of various factors will ultimately shape its future landscape and attractiveness to both investors and residents. However, it will take time for the market to achieve optimal conditions, given the multifaceted challenges and considerations involved.
For more immediate earnings visibility, Kenanga is still more inclined to put their money on players focusing on affordable housing. This is because of the challenges posed by the heightened cost of living and rising interest rates, as well as the growing population of young people seeking affordable housing solutions.
Kenanga likes MKH given its focus on affordable and transit-oriented development (TOD) projects. The group plans to launch affordable high-rise service apartments and retail shops with a total GDV of RM581.9m, and with RM722.0m in unbilled sales, revenue sustainability is expected over the next two years.
They also like MKH for its expanding plantation business in Kalimantan and its proximity to the new capital city of Indonesia that opens it up to various opportunities.
On a broader perspective, Kenanga finds it increasingly hard to find value among property stocks as share prices have run way ahead of fundamentals. We cut our call on the sector to UNDERWEIGHT from NEUTRAL and downgrade our recommendations for SIMEPROP and SPSETIA to UNDERPERFORM from OUTPERFORM and MARKET PERFORM, respectively. Kenanga has cut their call on the sector to UNDERWEIGHT from NEUTRAL and downgraded their recommendations for SIMEPROP (UP; TP: RM0.84) and SPSETIA to UNDERPERFORM from OUTPERFORM and MARKET PERFORM, respectively.
