RHB Research stays ‘overweight’ on property and real estate sector, sees value despite market volatility

Anis Hazim / theedgemarkets.com April 05, 2023 | Updated 1 day ago 

  • Many developers under the research house’s coverage have become more upbeat on the property market this year, in view of their more aggressive launching pipelines and sales targets.
  • Such developers include UOA Development Bhd, which will launch three new projects in 2023, while S P Setia Bhd and Mah Sing Group Bhd have set higher sales targets, implying growth of 5% to 15% in 2023.

KUALA LUMPUR (April 5): RHB Research has maintained its “overweight” rating of the property and real estate sector, naming IOI Properties Group Bhd and Matrix Concepts Holdings Bhd as its top picks.

In a research note on Wednesday (April 5), analyst Loong Kok Wen said that she still sees value in the property sector, despite the recent volatility in the equity market.

“Our investment thesis remains unchanged, as the interest rate upcycle is nearing an end, and China’s reopening should benefit companies that own retail and hospitality assets,” Loong said.

She opined that the government’s plan to expand the international airports in Penang and Subang, as well as establish a special financial zone in Iskandar Malaysia, will have a positive spillover effect on the property market over the medium term.

Following the banking crisis in the US, the analyst is of the view that it may prompt a slowdown in rate hikes, which somewhat is favourable for potential property buyers, as it could mean that mortgage rates will most likely stabilise at current levels (at 4.0% to 4.1%) over the next three to six months.

“We also believe the interest rate upcycle should peak in the first half of 2023 — current stock valuations have already factored in the impact of further rate hikes on property demand,” she said.

Meanwhile, property sales momentum is expected to be sustained in 2023, after aggregate property sales grew 11% quarter-on-quarter in the fourth quarter of 2022.

Despite the multiple rounds of overnight policy rate hikes and rising inflationary pressures, the analyst noted that aggregate property sales only dropped by 2% year-on-year in 2022.

“In addition to the unstable political environment towards end-2022, property buyers have been relatively unperturbed by the macroeconomic factors — possibly due to the healthy pickup in economic growth post pandemic,” she said.

Moreover, many developers under the research house’s coverage have become more upbeat on the property market this year, in view of their more aggressive launching pipelines and sales targets.

Such developers include UOA Development Bhd, which will launch three new projects in 2023, while S P Setia Bhd and Mah Sing Group Bhd have set higher sales targets, implying growth of 5% to 15% in 2023.

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