We view that the announced initiatives during the launch of the National Housing Policy 2018-2025 may not be sufficient to uplift the property market sentiment. Maintain NEUTRAL on the sector due to the absence of near-term catalysts needed to warrant a re-rating. Nonetheless, a mild recovery of interest in the sector cannot be ruled out given the trough valuation and the introduction of new policies. Our top picks include Sunway (BUY, TP: RM2.18) and MB World (BUY, TP: RM2.65).

NEWSBREAK

Housing and Local Government Minister Zuraida Kamaruddin launched the National Housing Policy (DPN) 2018-2025 which outlines five focuses including (i) quality housing for all; (ii) improving accessibility and affordability; (iii) cohesive neighbourhood; (iv) improving coordination between housing development & transportation; and (v) strengthening institutional capability for the National Housing Policy. Key takeaways from the press conference are (i) affordable housing to range from RM90k to RM300k, (ii) Home Ownership Expo in March and (iii) RM1bn fund by Bank Negara Malaysia to provide financing for the B40.

HLIB’s VIEW

Positive on initiatives. We are positive on the announced initiatives as it is expected to spur demand from the B40 income group. The affordable housing prices will be capped between RM90k to RM300k depending on the region and its mean income, allowing it to better cater to its residents. With regards to the upcoming Home Ownership Expo, there will be over 180 property developers participating, offering for sale 22k units valued at RM22.5bn in hopes of clearing the overhang units in the market. Based on our channel checks, we gather that some developers will be providing additional goodies (in addition to existing rebates) during this event to incentivise buyers. Developers participating in the expo have been asked to offer at least a 10% discount on their properties.

Financing fund for the B40. Recall that the Budget 2019 announced a RM1bn fund to be established by Bank Negara Malaysia via participating financial institutions. The fund will provide financing rates as low as 3.5% p.a. to aid first-time home buyers earning not more than RM2.3k per month to purchase affordable homes priced up to RM150k.

Maintain NEUTRAL. We view that the announced initiatives may not be sufficient to uplift the property market sentiment. Our 6 BUY calls out of the 8 companies under our coverage is largely attributed to bottomed valuations. We maintain NEUTRAL on the sector due to the absence of near-term catalysts. Nonetheless, a mild recovery of interest in the sector cannot be ruled out given the trough valuations and the introduction of new policies.

Top Picks. We continue to like Sunway (BUY, TP: RM2.18) as an underappreciated property-construction conglomerate with mature investment properties, growing trading division and potential listing of healthcare business. MB World (BUY, TP: RM2.65) is our small-cap pick given its first mover advantage to capture the spill over effect from the growth in the RAPID project in Pengerang and Desaru Coast.

Source: Hong Leong Investment Bank Research - 30 Jan 2019