IT looks like nobody can predict accurately how the Malaysian property sector would fare in 2021.
By far, analysts have a mixed view as to whether the market would stabilise or remain soft for a while longer amid the current COVID-19 pandemic spell which has dented the prospect of a speedy property sector recovery.
TA Securities Research expects developers to chart a better performance in 2021 as the market slowly regains some confidence with the commencement of National Immunisation Programme from late last month.
“All in, we believe the prolonged low interest rate environment, abundant market liquidity, and supportive government measures would help to spur demand for properties,” projected analyst Thiam Chiann Wen in a property sector update.
“Having said that, we expect better market sentiment along with stronger recovery in economic and business activities should contribute to better developers’ sales prospects ahead and eventually translate to stronger earnings going forward.”
According to the research house, positive sales momentum in 4Q 2020 and developers’ ambitious 2021 sales target have further reinforced its bullish view on the sector.
“We think developers deserve a re-rating, considering their robust future sales growth and attractive valuations,” opined Thiam.
“While more convincing recovery is expected in 2H 2021, we advocate investors to start building positions in property stocks at this time.”
All-in, TA Securities Research maintained its “overweight” rating on the property sector with S P Setia Bhd (target price: RM1.18) and Mah Sing Group Bhd (TP: RM1.23) as its top picks.
Meanwhile, AmBank Research is less bullish on the property sector outlook, anticipating lower new sales year-on-year (yoy) in view of the lacklustre market and adverse impact of the movement control order (MCO) and COVID-19 pandemic.
“Hence, we do not expect to see surprises in earnings over the next 12-18 months,” projected analyst Thong Pak Leng.
“Developers are more aggressive in clearing unsold units by offering discounts with the inventory level on a declining trend. We believe that this is a positive move to realise cash flow.”
Moreover, the research house reckoned that most developers remain cautious, and are still assessing the economic situation before deciding to continue or defer future launches.
“We believe that consumer sentiment shall remain weak for the time being with spending mainly focused on necessities while big-ticket items such as properties will take a back seat for now,” justified Thong.
AmBank Research retained its “neutral” rating on the property sector as it does not anticipate earnings surprises in the short to medium term.
It has “buy” calls on (i) IOI Properties Group Bhd (fair value: RM1.86) which is banking on strong contribution from its property development projects in China, and (ii) Mah Sing (FV: RM1.28), underpinned by the strong take-up rates of its recent launches and its upcoming rubber glove business. – March 9, 2021
