RHB IB stays overweight on property sector; top picks UEM Sunrise, IOI Properties, E&O

• The research house said developers with sizeable landbanks and industrial segment exposure should see greater benefit from infrastructure developments and rising investment flows.

KUALA LUMPUR (April 15): RHB Investment Bank (RHB IB) has maintained its “overweight” rating on the property sector and said it expects the sector to continue to be driven by: i) positive news flow on potential infrastructure projects; ii) active land transactions and iii) influx of investments, especially in the data centre, green energy and manufacturing sectors.

In a sector update on Monday, the research house said developers with sizeable landbanks and industrial segment exposure should see greater benefit from infrastructure developments and rising investment flows.

It said pump priming across the Klang Valley, Iskandar Malaysia and Penang region should lift the sector’s overall valuation.

RHB IB said its top sector picks are UEM Sunrise Bhd (UEMS), IOI Properties Group Bhd (IOIPG) and Eastern & Oriental Bhd (E&O).

The research house said that apart from the positive economic impact in Singapore, Johor Bahru (JB) also experienced some spillover from Taylor Swift’s concert last month, benefitting the hospitality, retail and F&B sectors.

RHB IB said that hotel occupancies were full, F&B outlets enjoyed good business, while transporters were busy fetching concert goers across the causeway during that week.

“The effect strongly shows the increasing significance of Johor given its proximity to Singapore.

“Hotels in JB are already enjoying high occupancy rates of 80-90% during normal weekends.

“Retailers in F&B and golfing services are putting up new stores or expanding their services.

“Occupancy of certain shopping malls in JB is almost full,” it said.

RHB IB said it believes many retail brands will now consider JB as an important market for their store expansion in the near term.

“All these wealth effects are expected to translate to stronger demand for property in Iskandar Malaysia.

“While many developers are still busy looking for new land, there is also a rising pool of end-users intensifying the competition, driven by an influx of FDIs ie manufacturers and data centre players, as well as expansion plans by some E&E companies. Lately, ‘land collectors’ such as Scientex Bhd (Neutral, TP: RM3.85) and Lagenda Properties Bhd (Non-rated) have also been buying large tracts of land for long-term development. Land prices are expected to escalate further given such momentum,” it said.

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