Developers turning more upbeat about property sector — Maybank IB Research

KUALA LUMPUR (March 5): Maybank Investment Bank Research (Maybank IB Research) said today the worst is over for the property sector as it believes the sector should continue to be driven by a better economic outlook, historically low interest rate environment and pent-up demand.

Its analyst Wong Wei Sum said in a note that despite the reimposition of Conditional Movement Control Order (CMCO) and Movement Control Order (MCO) in the fourth quarter of 2020 (4Q20) to 1Q21, property sales continued to recover from the impact of the coronavirus pandemic.

"Judging from the sales momentum in early 2021, most developers expect a better sales outlook in FY21 though it may be coming at the expense of lower margins on lower pricing," she added.

Meanwhile, of the four developers (S P Setia Bhd, Sime Darby Property Bhd, Mah Sing Group Bhd, Tambun Indah Land Bhd) who have reported their latest results, S P Setia and Sime Darby Property's were below expectations, while Mah Sing and Tambun Indah Land's were in line or above expectations.

"Despite the reimposition of CMCO in 4Q20, core earnings improved quarter-on-quarter (q-o-q) in 4Q20 on the normalisation of construction works and strong pickup in sales driven by pent-up demand," said Wong.

She also noted that sales-wise, there was q-o-q growth in 4Q20 property sales due to the pent-up demand post-lockdown as well as attractive marketing packages offered.

"Among the four developers, both Tambun Indah Land and Sime Darby Property's FY20 actual sales were above expectations while S P Setia and Mah Sing met their targets," she said.

Judging from the sales momentum in January to February and Covid 19 vaccination roll-out, she believes that developers are turning more positive about FY21 sales outlook, which is reflected in their higher sales targets for FY21.

"Nevertheless, we expect margin to continue to stay subdued as competition continues to rise. Also, margins are coming under pressure due to developers' higher involvement in the affordable housing segment," she said.

She added that the reimposition of MCO hould have lower damage impact on sales compared with in 2020 as most developers have acclimatised to the "new norm" and accelerated the efforts to market their products via digital platforms.

She maintains a tactical positive stance on the sector, calling Sunway Bhd, Sime Darby Property and S P Setia her top picks.

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