CIMB Securities has maintained a NEUTRAL rating on the property sector following stronger-than-expected earnings across all four developers under its coverage for the fourth quarter of 2024.
The house picked Mah Sing Bhd as its top pick with a Buy call and a target price of RM2.10 while Sunway Bhd, UEM Sunrise Bhd, and SP Setia Bhd were rated as Hold.
Sunway’s core profit for FY24 surged 69% year-on-year (YoY) to RM992 million, driven by improved performance across all key operating units and the recognition of RM124 million in development profits from the completion of Parc Central Residences. Total revenue climbed 28% YoY to RM7.9 billion, the highest since its listing in 2011. Its earnings exceeded CIMB Securities’ forecast by 114% and outperformed market estimates by 6%.
Mah Sing’s FY24 core net profit rose 12% YoY to RM241 million, surpassing expectations by 6%, although turnover dipped 3% YoY as new launches remained in their early stages. The company has been actively acquiring land, securing a new parcel in Sentul worth RM283 million in early 2025, adding to the RM11.3 billion in gross development value (GDV) accumulated from 11 land purchases in FY23-24.
UEM Sunrise posted a 38% YoY jump in core profit to RM104 million, significantly beating CIMB Securities’ and consensus estimates by 75% and 36%, respectively. This growth was bolstered by a RM32 million gain from selling its 40% stake in Aura Muhibah, increased contributions from joint ventures, and lower interest expenses. Adjusted for the sale, core earnings would have declined 4% YoY to RM73 million. Higher land sales, which rose 18% YoY, helped offset a 6% drop in property development revenue.
SP Setia’s FY24 net profit soared 77% YoY to RM631 million, marking its strongest performance in five years, with revenue rising 21% YoY. Its top-line growth was primarily driven by projects in Johor, KL EcoCity, Bandar Kinrara, and Setia Bayuemas. The company also benefited from RM1.4 billion in major land sales, which contributed 26% to its FY24 revenue and 63% to pre-tax profits. A RM56 million gain from selling a 50% stake in Retro Highland also boosted earnings.
CIMB noted that all four developers increased dividend payouts in response to their strong financial performance. SP Setia doubled its dividend to 2.88 sen per share, while UEM Sunrise raised its payout by 65% YoY to 1.24 sen. Sunway declared a total dividend of 6 sen for FY24, exceeding CIMB Securities’ forecast of 5.5 sen. Mah Sing maintained a dividend payout ratio of 48%, within its minimum policy of 40%.
Despite the robust earnings, CIMB believes the sector’s outlook for FY25 on new property sales remains mixed. Sunway and Mah Sing set higher targets of RM3.6 billion and RM2.7 billion, representing YoY growth of 20% and 10%, respectively. In contrast, SP Setia’s RM4.8 billion target is 4% lower YoY, while UEM Sunrise’s RM1.1 billion target marks a 26% decline.
Beyond traditional property development, developers are capitalising on the growing industrial land demand, particularly for data centres. Eco World recently signed an RM4.8 billion, 20-year lease agreement with Google for a 58-acre site in Puncak Alam.
UEM Sunrise has also partnered with GuocoLand to develop key freehold sites in Iskandar Puteri, including a revamped masterplan for Gerbang Nusajaya’s industrial zone and enhancements to Puteri Harbour’s commercial sector. CIMB Securities cautioned that large-scale industrial land monetisation may take time to yield returns and require significant upfront costs.
While headwinds seem to appear, developers are spreading their business potential by aggressively moving into industrial and affordable housing project to mitigate any possible disruptions.
