AT a glance, a recovery in property demand seems to be certain as a 2021 data by Bank Negara Malaysia (BNM) points to total loan applied for property purchase having recovered strongly to RM441 bil or 31.8% year-on-year (yoy) from RM334.8 mil in 2020.
This pent-up demand scenario was a contrast to a 6.3% yoy decline in 2020 which was mainly attributed to the adverse impact of lockdowns to contain the spread of COVID-19.
Whether this would translate to a better prospect for property developers is another question altogether given MIDF Research is of the view that new property sales outlook would be flattish to slight positive in 2022 as stronger buying interest from easing of movement restriction would partially be offset by discontinuation of the home ownership campaign.
“In addition, we reckon that it will remain a challenge for property developers to convert booking into sales,” opined analyst Jessica Low Jze Teing in a property sector outlook. “In a nutshell, we maintain our “neutral” stance on property sector.”
A bright spark, however, is that loan application in January 2022 remains strong at RM34.6 bil (+5.4% yoy) as buying interest was higher following easing of movement control measures under the National Recovery Plan (NPR).
“(Also), earnings outlook for property companies is expected to be better in 2022 as construction activities at project sites normalised,” projected MIDF Research. “Besides, the higher sales recorded by property companies in 2021 should translate into higher earnings in 2022.”
In 2021, the KL Property Index underperformed the FBM KLCI by recording a decline of -4.22% against the benchmark index’s drop of -3.67%. The underperformance of KL Property Index was mainly attributed to the higher beta nature of property companies amid uncertain economic outlook in 2021 and COVID-19 pandemic.
The top three worst performing property companies were Meridian Bhd (-84.7%), Jiankun International Bhd (-61.5%) and Acme Holdings Bhd (-61.3%).
However, the KL Property Index gained +1.8% in the first two month of 2022 amid better earnings outlook for property companies and recovery in economy.
Stock pick-wise, MIDF Research has “buy” calls for Mah Sing Group Bhd (target price: 80 sen) and IOI Properties Group Bhd (TP: RM1.29).
“We are positive on Mah Sing due to its positive new sales outlook which is underpinned by strategy of creating affordable range properties. Also, its earnings outlook is supported by full year contribution from gloves manufacturing division,” noted the research house.
“Meanwhile, we like IOI Properties for its undemanding valuation of trading at steep discount of 72% to its latest NTA (Net tangible asset) of RM3.60/share. New sales prospect of IOI Properties will continue be driven by launches of projects in Malaysia and China.” – March 3, 2022
