• OVERWEIGHT. Although the recent sector re-rating may seem drastic, we think the share price recovery was just to “normalise” valuations. Share prices had been severely pressured over the last few years due to concerns over the property overhang, which already began easing in end-2021. Catalytic infrastructure developments and the influx of investments should continue to drive property sales ahead. Budget 2024 also shows the Government’s commitment to ease Malaysia My Second Home (MM2H) requirements. Top Picks: UEM Sunrise, Sunway and IOI Properties.

• MM2H guidelines to be relaxed. We are upbeat that the Government officially said that MM2H requirements will be loosened, although it gave no further elaboration on this in the Budget 2024 announcement last Friday. Previously, it was reported that the stricter guidelines resulted in a 90% plunge in MM2H applications. Hence, with these easier requirements, Penang Island, Kuala Lumpur’s KLCC and Mont’ Kiara areas, as well as the Iskandar Malaysia region should benefit, as these are typically the favourite spots among foreign property buyers. UEM Sunrise, Sunway and Eastern & Oriental (E&O) would be the prime beneficiaries of this measure.

• Incentives to have a positive spillover on the property sector. Some new policies and incentives will be introduced to achieve more high-impact investments. Given the burgeoning E&E sector, the Government mentioned its plan to open a high-tech industrial area in Kerian in north Perak. This initiative should encourage the growth of the housing market in the vicinity. Eco World Development (ECW MK, NR) and Tambun Indah are the developers that have projects (Eco Horizon and Pearl City) in the south of Seberang Perai. Over the next 1-2 years, we expect some developers to explore landbanking opportunities in the surrounding areas.

• Still confident on the Iskandar Malaysia property market. It was recently reported that the number of travellers using the Malaysia-Singapore land route via the two land border entrances (ie Causeway and MalaysiaSingapore Second Link) is expected to increase at a rate of 15% pa. The daily crossing is projected to reach 430k (total: 157m) by 2025 from an estimated 372k (total 136m) this year. The Government has approved MYR169m to roll out measures to ease congestion at the border entrances. We expect the upcoming announcements on the Johor-Singapore special economic zone (SEZ) to further drive interest on Johor-related property stocks as the rising cross-border traffic and the influx of foreign direct investments (FDIs) will be key drivers. AME Elite Consortium is the key industrial play on Iskandar Malaysia.

• Key drivers for property sales. Property sales in the remainder of 2023 and going into 2024 will be driven by: i) Pent-up demand post pandemic; ii) positive spillover from the increasing demand for industrial properties, which suggests an uptrend in new private investments; and iii) infrastructure developments which include the Rapid Transit System (RTS), and potentially Mass Rapid Transit (MRT) 3 and high-speed rail (HSR).

Source: RHB Securities Research - 16 Oct 2023