Outlook remains uninspiring but valuations are getting more conducive compared with historicals.

Short-term trading opportunities could come from the RRIM land awards and MRT 2 nd  line as well as RTO-themed stocks.

We upgrade the property (developers) sector to NEUTRAL. Top pick is Glomac (BUY; MYR1.27 TP).

What’s New

Key takeaways from our property conference last week suggest that the sector outlook remains uninspiring especially at the increasingly crowded Iskandar Malaysia. However, banks remain supportive of the mortgage market with various new mortgage packages being introduced.

Share prices have declined by 7-18% since we downgraded the sector to UNDERWEIGHT in Oct 2013 and valuations are getting more conducive at 0.5-0.7x P/RNAV (versus historical mean‟s 0.5- 0.8x and global financial crisis level‟s 0.3-0.6x).

What’s Our View

Investors should remain selective amid a generally uninspiring near-term property market outlook. We continue to like developers with large exposure in affordable housing, where demand is still resilient and supported by a young demographic. We also like new hotspots like Batu Kawan (Penang) that cater more to affordable housing and should benefit from the island‟s skyrocketing property prices and the 2nd Penang Bridge opening on 1 Mar 2014. Meanwhile, we remain cautious on luxury property developments and highly-speculative areas like Iskandar Malaysia.

Investors‟ interests should return to developers with projects in the Klang Valley on news of government land awards (RRIM land) and construction of the KVMRT 2 line. Interest is also brewing in the RTO space – Eco World Dev (ECW MK; NR) and Malaysia Aica (MAI MK; NR) where share prices have risen +26% and +85% YTD.

Source: Maybank Research - 19 Feb 2014