Property: Johor expected to be 'next big thing'
Your window to Malaysia
Tuesday, 29 January 2013
by Isabelle Francis of The Edge on Sunday, 27 January 2013 16:00
"It's a policy-driven domain that's avoided because of regulation issues. Plus, it's tougher for developers who have achieved billion-ringgit sales to outperform as things are getting more challenging now.
"S P Setia Bhd, for example, will have to look overseas as it already has the highest revenue base around," says a property analyst, adding that the acquisition of the Battersea Power Station in London in 2012 was a landmark deal for the company.
Accordingly, not many have turned bullish on UEM Land.
"After two disappointing quarters in a row, I would have called a 'sell' on the counter but maintained 'market perform' as I believe the company's immense prospects will eventually lift the shares. UEM has a good chance for re-rating. In fact, if not for the coming election, I would have called a 'buy' on the stock," says an analyst.
Analysts generally agree that while new developments slated for early 2013, such as the imposition of a higher real property gains tax (RPGT), are unlikely to be significant dampeners, the re-rating of the sector will have to wait until after the 13th general election. Loong, for one, expects the sector to grow strongly in 2013, largely driven by the population cycle, influx of liquidity and stronger gross domestic product growth.
"The key dampener will be the uncertainties associated with the general election. The sector should see a relief rally post-election," she adds.
As it is, macroeconomic concerns and uncertainties ahead of the election have caused an overhang in property counters.
"With a higher level of uncertainty ahead of the polls, even more people will avoid buying homes," an analyst points out.
Thus, investors are advised to buy selectively in the sector.
Some of the favourites are UOA Development Bhd, which offers a 7% dividend yield supported by strong earnings and a net cash position.
"Those who didn't get burnt in the initial public offering can UOA shares for the dividends," says an analyst who covers the stock.
The analyst also likes IJM Land Bhd for its exposure to the Johor Baru city centre. IJM Land had, in March, tied up with Tan Sri Tan Hua Choon of Goh Ban Huat Bhd to expand its landbank in the state where it already has its RM3 billion flagship project called Sebana Cove.
"We think IJM Land best represents the property sector in Malaysia, after S P Setia. It's a developer with a reasonable size, diversified landbank exposure across key states and a wide product range. Potential M&A or corporate exercises could also be on the cards," observes Loong.
Analysts are also having a relook at Sunway Bhd after its unit, Sunway City Sdn Bhd, acquired 779.07 acres of land in Pendas, Nusajaya, through a joint venture with Iskandar Investment Bhd (IIB) for RM412.7 million in early December.The transaction cements Sunway's position as one of the largest landowners thereand, hence, an emerging Iskandar Malaysia player.
This is in addition to the 691 acres acquired a year ago, bringing Sunway's total development land in Johor to 1,558 acres with a potential gross development value of RM25 billion.
This story first appeared in The Edge weekly edition of Dec 24-31, 2012.
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