Current Malaysia property demand trends
Demand appears resilient for now. We attended Star Property Fair 2011 over the weekend and were pleasantly surprised by the crowd. On a broader perspective, we reiterate our Neutral stance on the sector in anticipation of slower property sales growth going forward as we believe that the property cycle is peaking. We, however, expect the pricing/demand for prime-located or LRT/MRT-themed property projects
to stay strong.
Investor-dominated crowd. The considerable crowd at the property fair was a pleasant surprise to us. This was despite the school/public holidays and uncertainties permeating the global economy. Visitors were mostly locals and above 30-years old. From our observations/ discussions with sales personnel and agents, most visitors are buying/ looking for investment properties. In our view, this group would be thus sensitive to any potential stricter policies by BNM/government.
Shifting demand towards connectivity. We observed strong demand for properties with LRT/MRT stations in their vicinity. Such projects enjoyed strong take-ups and/or record prices. Encorp‟s The Strand @ Kota Damansara was fully sold in less than 3 weeks (retail + service apartments; non-bumi lots; non-developer interest bearing scheme; RM720-770psf; 640-2,500sqf; launched in early Nov‟11) while Sunway Velocity (900-1,600sqf) achieved 70% take-up despite being offered at RM950psf record price vis-a-vis the area. The next “hot” project, which attracted considerable interest at the fair, is IOI Properties‟ SkyPOD Puchong project supported by the new STAR LRT station nearby.
Bite-sized projects: “Small” but “sexy” in absolute pricing. We detect a growing demand trend for “affordable” homes. This has led to the proliferation of the „shoe-box‟ unit concept in the Klang Valley. This refers to properties being sold at relatively high psf prices but decently ranged on a size basis i.e. RM400-800k due to smaller floor area. Despite a RM800psf ASP, OSK Properties‟ 392 units SoFo (priced from RM390k/unit onwards; 488-1,000 sqf) at the Atria redevelopment project was fully sold in a day. The success could also be due to the lack of new supply at the matured Damansara Jaya area. The “leftover” of hot projects are usually big size units (more than 1,500sqf/unit) with pricing at above RM1m, in our observation.
Locally driven demand. Based on our discussion with property developers and agents on site, recent demand for property has been driven by locals. Foreign buying has mostly been focused on high end properties and the prime KLCC area (which is a familiar location to them). Moreover, the recent property launches (like bite-sized units) are more targeted towards the local population. We expect the current trend to continue given the global economic crisis.
Annual property event by The Star. The 3-day property fair was held at the KL Convention Centre from 25-27 Nov‟11. Most listed developers e.g. SP Setia, Mah Sing, Sunway, Ivory, Glomac, Encorp and Dijaya participated in the event. Apart from the popular “Developer Interest Bearing Scheme” (DIBS), selected developers also offered attractive 5-14% rebates to property buyers.
Housing Minister guided for cautious 2012 growth. The Housing and Local Government Minister Datuk Seri Chor Chee Heung said that the Malaysia‟s property sector is expected to experience cautious growth in 2012 during the launch of Star Property Fair 2011. He expects the property industry to register a 3.4% YoY growth in 2011,
versus 5.1% in 2010 and the downward trend would continue to 2H12.
UEM Land (Hold; RM2.02 TP). The largest developer in Malaysia (in term of landbank and market capitalisation) and land owner in Nusajaya with total remaining landbank of more than 4,068 acres (73% in Nusajaya, 27% outside Nusajaya) and estimated RM31b GDV. Potential surprises could come from more government land developments. Khazanah is the major shareholder, with a 67.5% stake in UEM Land.
Sevreal Malaysia Property Stocks Reviewed
SP Setia (Not rated) - A versatile property developer with a spectrum of mid-to-high end products. SPSB has 3,957 acres undeveloped landbank with an e.RM46b GDV. Next key earnings drivers include its RM6b KL Eco City, RM10b Setia City and e.RM8b MOH Bangsar project. In end-Sep’11, its major shareholder, PNB has offered a conditional take over with RM3.90 offer price for SPSB shares and RM0.91 for its warrants.
Sunway (Hold; RM2.28 TP) – One of the leading property and construction groups in Malaysia (new merged entity of Sunway City and Sunway Holdings). It has RM2.9b outstanding orderbook YTD (construction) and RM1.6b unbilled sales as at Sep’11 (property).
Mah Sing (Hold; RM1.76 TP) - A versatile property developer with a spectrum of mid-to-high end products. MSGB is famous with its fast turnaround strategy. It has 1,070 acres remaining landbank (Klang Valley, Penang and Johor Bahru) with an estimated RM13b GDV.
Glomac (Hold; TP is under review) - A versatile property developer with a spectrum of low-to-high end products. Next key earnings catalysts include its 90 acres prime-located Puchong land worth RM1b GDV. It is our preferred pick for the property sector
by Maybank Investment Bank 30th Nov 2011