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Tough times for property plays in Malaysia

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Kenanga Research in a sector update slashed its earnings and sales forecasts for property developers in Malaysia that have yet to factor in the impact of the lockdowns. AFP

Tough times for property plays in Malaysia

The outlook on Malaysia's property sector has soured for the remainder of the year as the anticipated recovery has been pushed back by the implementation of the lockdowns accompanying the National Recovery Plan.

Kenanga Research in a sector update slashed its earnings and sales forecasts for companies that have yet to factor in the impact of the lockdowns.

"Arising from the numerous and extended MCOs [movement control orders] which limited productivity, we anticipate further earnings and sales risks for most developers under our coverage for the remainder of the year," it said.

These companies include IOI Properties Group, Mah Sing, Sime Property, SP Setia, UEM Sunrise and UOA Development.

Apart from the Covid issue, Kenanga noted that the longstanding oversupply situation is unlikely to subside in the near term due to the large amount of overhang and unsold-under-costruction units still in circulation.

Knight Frank's Global House Price Index had showed that out of the 56 countries surveyed, Malaysia ranks the fourth worst in house price growth in the first quarter of this year.

Taking into consideration the challenges, Kenanga maintained its "neutral" outlook on property with expectation of rotational plays into the sector every once in a while.

"Our preferred pick for the sector is ECOWLD [Eco World Development Group Bhd] which have attractively priced product offerings and the capability to deliver sales and earnings in the immediate term.

"We adjust our calls for Spsetia [S P Setia Bhd] and Uems [UEM Sunrise Bhd] to 'market perform' [from 'outperform' (OP) and 'underperform' (UP) respectively] given its share prices have approached our TPs [target prices]," it said.

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