Bursa’s property index climbs on growing optimism

Bursa’s property index climbs on growing optimism
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KUALA LUMPUR (March 11): Bursa Malaysia’s Property Index climbed for the fifth day and finished at its intra-day high today, amid better market sentiment surrounding the sector.

The index, which measures property sector-linked stocks on the local bourse, closed 2.01% or 14.8 points higher today at 752.09 points. The index was the 10th best performer among the indices present on Bursa Malaysia. In contrast, the benchmark FBM KLCI closed 0.64% or 10.42 points lower at 1,629.41 points.

It is also worth noting that at current levels, the index is now at its second-highest level recorded over the past year, after it touched 752.78 points on Dec 17, 2020.

According to Bloomberg Data, gains in index heavyweights Eco World Development Group Bhd, UEM Sunrise Bhd and Mah Sing Group Bhd contributed to the index’s climb today.

Eco World climbed 8.33% or five sen to 65 sen, valuing it at RM1.91 billion. UEM Sunrise closed 6.52% or three sen higher at 49 sen, yielding a market value of RM2.48 billion. As for Mah Sing, it was 6.21% or five sen higher at 85.5 sen, giving it a market capitalisation of RM2.08 billion.

Year to date (YTD), the property index is up 2.37%, outperforming the FBM KLCI’s 0.14% climb. Compared with a year prior, the property index is 10.82% or 73.44 points higher from the 678.65 points seen on March 11, 2020, while the FBM KLCI has risen 12.85%.

In a note today, TA Securities Research opined that the property sector is one of the key sectors that will shine in the post-pandemic environment, thanks to record low interest rates, abundant market liquidity, and supportive government measures.

“Positive sales momentum in 4Q20 and developers’ ambitious 2021 sales target have further reinforced our bullish view on the sector. We think developers deserve a re-rating, considering their robust future sales growth and attractive valuations,” it noted.

The research houses’ top pick for the sector is S P Setia Bhd with a target price (TP) of RM1.18 which it likes for its quality and diverse landbank across Malaysia, strong management capabilities and decent valuation. It also likes Mah Sing Group Bhd which it has assigned a TP of RM1.23 for its fast turnaround business model in both property development and healthcare.

From an earnings perspective, results for the fourth quarter ended Dec 31, 2020 (4QFY20) came in slightly higher and resulted in calendar year 2020 (CY20) earnings per share (EPS) contraction to 38% year-on-year (y-o-y), from previously forecast 40%. The contraction in EPS was due to the lockdowns that dominated last year, but TA Securities noted that it was encouraged by the ability of developers to make up for lost time with swift and innovative actions.

“With that, we anticipate CY21 EPS to jump 75% on sector recovery and low base effect. In addition, the sector is set to enjoy a boost in earnings from the staggered completion of Battersea Power Station Phase 2 and 3a (S P Setia and Sime Darby Property) in 2021 as well as maiden contribution from Mah Sing’s glove manufacturing venture. Meanwhile, we project CY22 EPS to grow by 17% y-o-y,” it noted.

TA Securities has maintained its overweight stance on the sector.

In a note yesterday, Maybank Investment Bank Research said it had, over the past few weeks, initiated technical buys on property stocks such as S P Setia, Eco World International Bhd, Eco World Development Group Bhd, UOA Development Bhd and Malaysian Resources Corp Bhd.

“This signals a gradual rotational play into property names, while the KLPR Index has risen above the 50-week EMA line for the first time since July 17.

“Yesterday’s breakout above the long-term downtrend line along with a bullish reading in both the RSI and DeTrend suggests a new uptrend is unfolding. Given a new set of classic 1, 2, 3 pattern was formed, we opine a new bull is about to be unleashed. The index is set to challenge the major resistance at 758, 830 and 860 over short to medium term, while the immediate support is pegged at 670,” it added.

Lam Jian Wyn and Tan Choe Choe