• Property stocks under our coverage exhibited mixed result; Inline – Mah Sing & Matrix, Above (Simprop), and Below (Lagenda) of our earnings forecast during the quarter under review.

• We anticipate the property sector outlook to remain robust for the remainder of 2HFY24 and carry over into FY25 supported by 1) the incentive of The Housing Credit Guarantee Scheme, 2) the introduction of 100% stamp duty waiver on transfer instruments and loan agreements for properties priced at RM500,000 or below, and 3) salary hike for civil servants.

• We maintain an Overweight recommendation on the property sector. We have BUY recommendations for Mah Sing (TP: RM2.07), Lagenda (TP: RM1.48), and Simeprop (TP: RM1.73). For Matrix, we downgrade to HOLD from BUY (TP: RM1.99), given the recent share price rally, which already hit our TP.

Overall Sales Performance Remain Intact

The 1HFY24 core net profit for Mah Sing Group Berhad (Mah Sing) and Matrix Concept Holdings Berhad (Matrix) was largely inline with our expectations. Mah Sing maintained a strong sales performance, reaching RM1.66bn in the first eight months of FY24, which represents 66% of the full-year FY24 sales target. The strong sales performance was primarily driven by its M series, which saw higher demand among first-time homebuyers. In contrast, Matrix, core net profit fell by 3.5% YoY attributed to lower revenue contributions from the property development segment, aligned with a slower number of launches earlier in the year. However, we expect Matrix’s new launches to accelerate for the rest of FY25. Sime Darby Property (Simeprop) achieved record-high revenue in 1HFY24, exceeding our forecast. The company reported RM2.1bn (+10% YoY) in total sales, marking the highest first-half sales since the 2017 demerger. This success was primarily driven by heightened sales activity and on-site development progress across major townships. Lagenda Properties Berhad (Lagenda) 1HFY24 earnings trailed our full-year forecast due to lower-than-expected project launches. Nonetheless, Lagenda recorded a historic high revenue with confirmed sales of RM297.14mn in 2QFY24. We anticipate Lagenda’s revenue for the 2HFY24 to increase significantly, with the company potentially launching new projects and converting bookings amounting to RM543mn into sales.

Affordability with Strong Purchasing Power in 2H24

We anticipate the incentive of The Housing Credit Guarantee Scheme will increase firsttime homeownership rates and continue to stimulate growth in the residential real estate sector in the 2HFY24. Additionally, we expect 1) the introduction of 100% stamp duty waiver on transfer instruments and loan agreements for properties priced at RM500,000 or below, effective until the end of 2025, and 2) salary hike for civil servants, effective Dec 1, 2024, are expected to stimulate economic activity and boost the property market in the 2HFY24 to FY25. It is worth noting that ongoing infrastructure projects, such as the construction of the Penang LRT Mutiara Line, the resumption of LRT3 station construction, and the shift of investment into data centers, are expected to spur mixed-use developments, increase property values, and boost demand for residential real estate.

Maintain Overweight on the Property Sector

We expect the property market to remain resilient, driven by affordable housing incentives, increased disposable income, and ongoing infrastructure projects in the 2HFY24. We favour developers with a strong sales history, reputable brands, substantial land holdings in desirable locations, and minimal holding costs, which we believe company Mah Sing, Lagenda, and Simeprop suit for these requirements. We maintain a BUY call on Mah Sing (TP: RM2.07), Lagenda (TP: RM1.48), and Simeprop (TP: RM1.73). For Matrix, we downgrade to HOLD (TP: RM1.99) from BUY, given the recent share price rally, which already hit our TP.

Source: BIMB Securities Research - 3 Sept 2024