MALAYSIAN property stocks are becoming sexy again, thanks to a slew of incentives driving their prices. These include stronger Government support for the property sector, better market sentiment and greater foreign investments into the sector.
Analysts believe property stocks on Bursa Malaysia are set to rise further after being laggards for several years.
OSK research analyst Mervin Chow said the outlook for property stocks was good.
and more importantly, the Government’s pump-priming initiatives via the Ninth Malaysia Plan (9MP) and Visit Malaysia Year (VMY) to celebrate Malaysia’s 50th anniversary of independence.
“We are seeing greater buying interest in property stocks,” said Chow, adding that the broking house expected sentiment towards the property sector to improve further in the coming months.
Chow's property stock picks include Plenitude Bhd and Sunrise Bhd.
He said stocks that had attracted investors were generally large-cap property stocks with exposure to the Iskandar Development Region (IDR) in south Johor.
An analyst with CIMB Securities concurred with Chow that property stocks had attracted quite a lot of buying interest lately, including from foreign investors.
He said that for the past two to three years, property stocks were significantly re-rated to very cheap levels.
“However, the sector is now trading at 14 times the 2008 price-earnings ratio (P/E) and offers respectable dividend yields of around 5%.
“Many property stocks are offering single-digit P/Es and are therefore seen as attractive investments,” said the analyst.
CIMB Securities has an “overweight” call on the sector and expects property sales and launches to pick up momentum over the next 12 months.
The brokerage has named SP Setia Bhd and Mah Sing Group as favourites and KLCC Property Bhd as its top property investment choice. It also believes there were good upside to smaller property stocks.
“We have upgraded IOI Properties and MK Land from 'neutral' to 'trading buy' and Island & Peninsular from 'underperform' to 'neutral',” said the analyst.
He said the brokerage was not too concerned about the sharp consolidation of the market last month.
“The Kuala Lumpur Composite Index's (KLCI) recent rebound to 13-year highs is a big confidence booster on its own. The KLCI is a major barometer of consumer confidence and its upswing should be an indicator of better times ahead,” said the analyst.
He said market sentiment remained upbeat, despite negative influences like the fall of the Shanghai indices last month and the recent slump in mortgage repayment in the United States.
“We believe that generally, property companies in Malaysia are fundamentally strong,” said the analyst.
On individual property sectors, he said all the sub-sectors were improving. “Although the residential sub-sector remains the largest and most important component of the property market, prospects for the office, retail and even hotel sub-sectors are starting to look better too,” said the analyst.
He said supply of top grade office space in the Golden Triangle was getting scarcer, which meant that occupancy and rental rates could only go higher.
“This should also be the case for the top five malls in the Klang Valley which are drawing in increasingly large crowds. As for hotels, this year will be a bonanza due to VMY,” said the analyst.
SK Brothers Realty chief executive officer Charlie Chan said the property market was lacklustre for the past two years but had recently started to “shape up” because of the Government's proactive policies to make Malaysia an attractive investment destination.
Chan said SK Brothers had received a lot of enquiries from foreigners lately, especially for high-end properties in prime locations.
He said the Foreign Investment Committee's relaxation of rules on foreign purchases had made it easier for foreigners to own properties in Malaysia.
“But we also believe recent reports of the removal or cut in real property gains tax could help boost the property sector, if approved,” said Chan.
He said the Government's move to relax the rules was timely as other countries in the region were also providing more incentives to attract foreigners to invest in their properties.
Chan said the maturing of the real estate investment trust market in Malaysia also augured well for the property sector and companies related to the sector.
“There's now more coverage (by analysts) on prime properties in various property sectors in terms of valuation and yield, which allows local and foreign investors to know our market better,” he noted.
Chan said the disbursement of funds and implementation of the numerous projects worth billions under the 9MP would accelerate the growth of the property sector and the impact should be felt this year.
“We are just seeing the initial stage of the revival of the property sector. The extent of the success will depend a lot on how effective the Government promotes and improves its delivery system to entice more investors into the property market, especially foreign investors.
“For our part as agents of change, we will try our best to promote the sector,” he said.
