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Property sector
Maintain overweight: The main objectives of a recent conference were to provide an update on the status of developments in Iskandar Malaysia as well as highlight the current and future investment opportunities.
Most importantly, the conference also allowed us to gauge the feel on the ground with regard to Iskandar. From our conversations with the locals ranging from taxi drivers to professionals who are directly involved in Iskandar, we sense the increasing optimistism on Iskandar's prospects. We also gather that just like the majority of us, when the entire project was first launched in 2006 the locals were sceptical, but have over the years progressively turned more optimistic, especially after witnessing the progress that Iskandar has made.
Among the many papers presented during the conference, we were particularly captivated by the Johor government's presentation on public housing policy guidelines for Iskandar. The state government highlighted the current issues with regard to public or low-cost housing policy in Johor as well as the initiatives it will take to address the oversupply of low-cost housing and increase the affordability of houses for the middle-income population in Johor.
While the property market and property prices in Johor have been largely dampened by the overhang and oversupply in low-cost housing, we believe that successful implementation of the new initiatives will directly boost the state's property market.
We believe that developers with exposure in high-growth areas such as the Greater Kuala Lumpur, Penang and Iskandar regions will benefit the most, not only from the current but also future property up-cycles. Out of the three high-growth areas, we believe the Iskandar region presents the most upside for developers, both in terms of supply as well as price appreciation. With the progress at Iskandar going as planned and slated to reach its tipping point by 2012, we believe there is significant untapped potential for the property market there.
We maintain our "overweight" call on the property sector. We believe the biggest gainers from the current up-cycle are the mid- to high-end developers, particularly those focused on developing landed properties with significant exposure in high growth areas. As such, our top buys for the sector are UEM Land Holdings Bhd and S P Setia Bhd for mid- to large-cap property companies, while Plenitude Bhd is our top pick for small-cap companies. As we are reaching the final phase of the current up-cycle in mid- to high-end residential properties, our top buys also include stocks like Bandar Raya Developments Bhd and Hunza Properties Bhd. — OSK Research, June 7
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