Invest in property now or wait?

Kenanga Investment Bank Bhd believes the property sector is bottoming out but still lacks strong catalysts. The bank is advising investors to be selective in their investments, says head of equity research Sarah Lim.

“We reckon rebound or laggard plays with decent sales trajectory are worthwhile, such as IOI Properties Group Bhd. Most other developers are expected to be range-bound,” she says. S P Setia and Matrix Concepts Holdings Bhd are among those that offer yield plays of more than 5%.

UOA Development Bhd, which has a “market perform” call, is also an option for yields. Sunsuria Bhd, with its strong sales and earnings growth, commencement of dividends as well as upcoming joint ventures, is worth considering for an alpha play.

Lim will give a talk on “Property stocks: Bottoming out?” at The Edge Malaysia Investment Forum on Real Estate 2017. She will offer more insights into property stocks in Malaysia.

To be held at Sunway Putra Hotel in Kuala Lumpur on March 25, the forum’s theme is “Have we hit rock bottom? What’s next?” There will be seven speakers.

Lim notes that upward sector call revisions are more likely if there are meaningful catalysts, which include banking sector indicators and property policies that directly impact the sector.

She has a “neutral” call on property counters.

In 4Q2016, the Kuala Lumpur Property Index (KLPRP) saw a quarter-on-quarter drop of 5.8% — worse than the FTSE Bursa Malaysia KLCI (FBMKLCI) -0.7% drop. It is the second consecutive year the ­KLPRP has fared worse than the FBMKLCI. The 4Q2016 evaluation is based on a cut-off date of Dec 22, 2016.

Another speaker, deputy managing director of Sunway Bhd (property division for Malaysia and Singapore) Tan Wee Bee, will share insights in his talk “A challenging year — buy now or wait?”

He expects market sentiments to improve in the second half of 2017 after the volatility of the ringgit has stabilised.

“The property market will remain resilient in the longer term. Buyers can also expect to see more products that offer better sustainability, not just environmentally, but also economically and socially. These products will be introduced in the next two years,” he adds.

“Buyers are more cautious about their purchases and this has kept developers on their toes. It has prompted developers to dig deeper to deliver well-rounded products and offer good value packages. Developers are also becoming more innovative to increase competitiveness. Overall, this is beneficial to buyers and the industry.”

According to Tan, both residential and retail segments have received positive response, and sales have been encouraging from investors and owner-occupiers despite the sluggish market in 2016.

“Sunway Property was able to achieve our targeted sales of RM1.1 billion last year. For example, Sunway Mont Residences and Sunway Gandaria achieved over 90% take-up rate at their respective launches last year. The Klang Valley, Iskandar Malaysia and Penang remain the top three popular locations,” he says.

Other speakers at the forum are Previndran Singhe of Zerin Properties, Samuel Tan of KGV International Property Consultants, Michael Geh of Raine & Horne International Zaki + Partners, Rajesh Kumar Tharmalingam of Area Management, Tan Wee Bee of Sunway Bhd and Chris Tan from Chur Asssociates.

The free forum is exclusively for readers of The Edge. Tickets were available on a first-come, first-served basis.

This article first appeared in the March 13 issue of The Edge City & Country pullout.

This story first appeared in TheEdgeProperty.com pullout on March 17, 2017. Download TheEdgeProperty.com pullout here for free.