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RHB Research maintains “overweight” on property sector

Publish date: Mon, 15 Apr 2024, 12:20 PM

RHB Investment Bank (RHB IB) has maintained its “overweight” rating on the property sector, saying it expects the sector to continue to be driven by i) Positive news flow on potential infrastructure projects; ii) active land transactions; and iii) influx of investments, especially in the data centre, green energy and manufacturing sectors.

In a sector update on Monday (April 15), the research house said developers with sizeable landbank and industrial segment exposure should see greater benefit from infrastructure developments and rising investment flows. 

It also said pump priming across the Klang Valley, Iskandar Malaysia and Penang region should lift the sector’s overall valuation.

RHB IB said its top sector picks are UEM Sunrise Bhd (UEMS), IOI Properties Group Bhd (IOIPG) and Eastern & Oriental Bhd (E&O).

Meanwhile, the research house said apart from the positive economic impact in Singapore, Johor Bahru (JB) also experienced some spillover from Taylor Swift’s concert last month, benefitting the hospitality, retail and food and beverage (F&B) sectors.

“We understand that hotel occupancies were full, F&B outlets enjoyed good business, while transporters were busy fetching concert goers across the causeway during that week,” it said.

“The effect strongly shows the increasing significance of Johor given its proximity to Singapore.

“Hotels in JB are already enjoying high occupancy rates of 80-90% during normal weekends. Retailers in F&B and golfing services are putting up new stores or expanding their services. Occupancy of certain shopping malls in JB is almost full.”

The research house expressed belief that many retail brands will now consider JB ass an important market for their store expansion in the near term, with all these wealth effects expected to translate to stronger demand for property in Iskandar Malaysia.

On the revival of the Kuala Lumpur-Singapore High Speed Rail (HSR), RHB IB noted the reports that three consortia may have been shortlisted for the project.

“While funding plans and construction costs would typically receive closer scrutiny, the latest news seems to be positive on the progress,” it remarked.

“All eyes are now on the HSR, Johor Bahru Light Rail Transit (LRT) and Johor-Singapore Special Economic Zone. Major landowners are likely beneficiaries.”

Meanwhile, the research house said while many developers are still busy looking for new land, there is also a rising pool of end-users intensifying the competition, driven by an influx of FDIs, i.e., manufacturers and data centre players as well as expansion plays by some electrical and electronics (E&E) companies.

“Lately, ‘land collectors’ such as Scientex Bhd (Neutral, TP: RM3.85) and Lagenda Properties Bhd (Non-rated) have also been buying large tracts of land for long-term development. Land prices are expected to escalate further given such momentum,” it said. - April 15, 2024

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