Bursa’s property index rises on growing optimism

KUALA LUMPUR (March 11): Bursa Malaysia’s Property Index traded higher today amid better sentiment surrounding the property sector.

The index reached an intra-morning high of 751.69 points, rising by 1.95% or 14.4 points from the 737.29 achieved yesterday.

At 11.52am, the index has moderated some of the gains seen earlier this morning, up by 1.22% or nine points at 746.29. At the time of writing, the Property Index was the ninth-best performing index on Bursa Malaysia and outperformed the benchmark FBM KLCI, which recorded a 0.62% or 10.17-point decline to 1,629.66.

In a note today, TA Securities Research opined that the property sector is one of the key sectors that will shine in the post-pandemic environment, thanks to record-low interest rates, abundant market liquidity, and supportive government measures.

“Positive sales momentum in 4Q20 and developers’ ambitious 2021 sales target have further reinforced our bullish view on the sector. We think developers deserve a re-rating, considering their robust future sales growth and attractive valuations,” it noted.

The research houses’ top pick for the sector is S P Setia Bhd with a target price (TP) of RM1.18, which it likes for its quality and diverse landbank across Malaysia, strong management capabilities and decent valuation. It also likes Mah Sing Group Bhd, which it has assigned a TP of RM1.23 for its fast turnaround business model in both property development and healthcare business.

From an earnings perspective, results for the fourth quarter ended Dec 31, 2020 (4QFY20) came in slightly higher and resulted in calendar year 2020 (CY20) earnings per share (EPS) contraction to 38% year-on-year (y-o-y), from 40% previously forecasted. The contraction in EPS was due to the lockdowns that dominated last year, but TA Securities noted that it was encouraged by the ability of developers to make up for lost time with swift and innovative action.

“With that, we anticipate CY21 EPS to jump 75% on sector recovery and low base effect. In addition, the sector is set to enjoy a boost in earnings from staggered completion of Battersea Power Station Phase 2 and 3a (S P Setia and Sime Darby Prop) in 2021 as well as maiden contribution from Mah Sing’s glove manufacturing venture. Meanwhile, we project CY22 EPS to grow by 17% y-o-y,” it noted.

TA Securities has maintained its stance on the sector as a whole.

Maybank Investment Bank Research said in a note yesterday that over the past few weeks it has initiated technical buys on property stocks such as S P Setia, Eco World International Bhd, Eco World Development Group Bhd, UOA Development Bhd and Malaysian Resources Corp Bhd.

“This signals a gradual rotational play into property names while the KLPR Index has risen above the 50-week EMA line for the first time since Jul-17.

“Yesterday’s breakout above the long-term downtrend line along with a bullish reading in both the RSI and DeTrend suggests a new uptrend is unfolding. Given a new set of classic 1, 2, 3 pattern was formed, we opine a new bull is about to be unleashed. The index is set to challenge the major resistance at 758.00, 830.00 and 860.00 over short to medium term, while the immediate support is pegged at 670.00,” it said.

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