Developers with exposure in Klang Valley, Penang better options

Maybank Investment Bank Research remains cautious on property exposure in Iskandar Malaysia and prefers developers with exposure in the Klang Valley and Penang.

It said on Tuesday property transactions in Johor fell 33% on-quarter in 4Q14, underperforming the country (-7%) and other major cities/states such as KL (-12%), Selangor (+2%) and Penang (+8%).

Johor property prices have weakened 1% on-quarter versus Malaysia’s -0.2%, KL’s -0.9%, Selangor’s -0.1% and Penang’s -0.3%.

Maybank Research pointed out developers from China have been aggressively accumulating landbank in Iskandar Malaysia.

Shanghai-based developer Greenland Holdings Group recently acquired 128 acres of freehold land in the south of Bandar Baru Permas Jaya while Country Garden has received the green light from Department of Environment to continue its massive reclamation of 3,425 acres of the Forest City project near the second link.

“Malaysian developers have scaled back their launches/shifted their product mix to avoid direct competition with the Chinese developers.

“The former’s sales expectations for their Iskandar Malaysia projects have also been lowered.

“Judging from the number of approved high-rise projects, the Iskandar property market could be hit by too much supply of high-rise mixed development projects if there is still no coordinated planning and control; this will induce price volatility.

“The oversupply situation will be exacerbated by the huge incoming supply in 2015/2016 where units under construction have risen 18% on-yearin 2012 and 2013 respectively).

“We remain cautious on property exposure in Iskandar Malaysia and prefer developers with exposure in the Klang Valley and Penang.

“Among the stocks under our coverage, UEM Sunrise and Sunway have the largest exposure to Iskandar Malaysia at 88% and 57% of their total GDVs respectively,” said Maybank Research. - By The Star

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