The property sector is levelling up, driven by investments in data centres (DC) and semiconductors, as stated by RHB Investment Bank (RHB) in its Malaysia Property Sector Update on July 5, 2024, Friday.
RHB maintained its OVERWEIGHT rating on the property sector, favouring developers with exposure to the industrial segment, sizeable landbanks, and strong balance sheets, with top picks including UEM Sunrise (UEMS), Sime Darby Property (SDPR), and Mah Sing. The bank noted that investments by data centres and electronics players could significantly boost demand for industrial development, particularly with upcoming announcements on the Johor-Singapore Special Economic Zone (JS-SEZ) and the potential revival of the KL-Singapore High-Speed Rail.
Malaysia has approved RM114.7bn worth of investments in data centres and cloud services between 2021-2023, with a target to attract RM500bn in the semiconductor segment, according to Prime Minister Datuk Seri Anwar Ibrahim. RHB believes the data centre investment cycle is at an initial stage and expects more land transactions, highlighting developers like SDPR and Mah Sing as potential beneficiaries.
Property sales are expected to be stronger in the second half of 2024, with developers ramping up their launches. RHB observed encouraging demand for landed homes at township developments and high-rise units in strategic locations, noting a strong take-up for high-end landed units and luxury condominiums with large floor space. Projects like Senna and Fera by Eastern & Oriental, The Ophera by SDPR, and Aetas Seputeh by Avaland have all seen significant sales.
Footfall to sales galleries in Iskandar Malaysia has doubled from the previous year, with an increase in purchases from foreign buyers, particularly Singaporeans. RHB mentioned that Sunway Iskandar's sales gallery has seen a significant rise in visitors, and UEMS has received many bookings for upcoming projects. The bank expects greater urbanisation and industrialisation in Iskandar Malaysia due to the JS-SEZ to drive property demand in Johor.
The analyst anticipates positive news flow in the second half of 2024, which will buoy investor sentiment in the property sector, including potential incentives for the JS-SEZ, infrastructure developments, and foreign and domestic direct investments. The detailed announcement on the JS-SEZ is expected in September or October, which could spur further re-rating of property stocks.
The house remains positive on the new Malaysia My 2nd Home (MM2H) regulations, aimed at attracting high-net-worth individuals. The programme requires participants to own property, benefiting developers with exposure in key areas like KL city centre, Mont' Kiara, Penang, and Iskandar Malaysia.
RHB maintained an OVERWEIGHT call for the property sector, noting it trades at a 45% discount to RNAV. The current market upcycle is seen as healthier compared to the 2010-2014 period, driven by normalised interest rates and a focus on technology and semiconductor industries, which should boost Malaysia's GDP growth.
UEM Sunrise is highlighted as a key proxy for Iskandar Malaysia's growth, with plans for renewable energy industrial parks and data centre campuses. Sime Darby Property is expected to benefit from investments like Google's data centre in Elmina Business Park. Mah Sing is noted for its successful 500MW power allocation for its Southville DC Hub, enhancing its value for data centre development.