KUALA LUMPUR: The property sector ranked as the third-best performer (after construction and utilities) in the first 11 months of 2024, benefiting from robust growth in data centre (DC) investments in Malaysia and the Johor-Singapore Special Economic Zone (JS-SEZ), according to CIMB Securities Sdn Bhd.
The research firm said that the sector outpaced the broader FTSE Bursa Malaysia KLCI (FBM KLCI) by 15 per cent.
"In our view, the increased appetite for property counters was largely driven by two key factors, which are renewed interest in Johor's property market and reflating land values due to the rising proliferation of hi-tech industrial facilities (including DCs).
"Nevertheless, we retain our 'neutral" stance on the sector heading into 2025," it said in a research note.
Although sector earnings and property launches in the first nine months have either broadly met or exceeded expectations, CIMB Securities said they were partly propped up by strategic land sales.
Moreover, the firm doubts that the sentiment-driven interest in Johor-related property names can hold up without the successful launch of the JS-SEZ, which has been pushed back to January 2025 and the planned revival of the Johor-Singapore High Speed Rail.
CIMB Securities said that Mah Sing Group Bhd is its top pick for the property sector as it provides solid exposure to the affordable housing market through its M-Series range, which typically enjoys high take rates exceeding 90 per cent.
The firm said this enables the company to benefit from the upcoming minimum wage hike in February 2025 and civil servant salary hike in Dec 2024.
"This is backed by its strong balance sheet (net gearing as of Sept 30 at 22 per cent) and remaining gross development value (GDV) of RM29.8 billion.
"Another key re-rating catalyst for the stock lies in the finalisation of commercial terms for its joint venture with Bridge Data Centre at the Mah Sing DC Hub@Southville City (expected by the first quarter of 2025)," it added.
CIMB Securities noted that the sector could be spurred by a successful JS-SEZ launch and the introduction of the Madani deposit scheme or other congruent measures to improve upfront affordability.
It added that the sector's catalysts come from the reintroduction of the highly successful Home Ownership Campaign aimed at clearing property inventories and further refinements to the My Malaysia Second Home (MM2H) policy, such as the removal of the flat four per cent stamp duty on foreign home ownership.
The key downside risks stem from rising inflationary pressures, which could impact local property demand by eroding household disposable income and increasing property construction costs due to rising input and labour costs, potentially widening the property price–to-income gap.