We expect the affordable segment to perform well, driven by resilient demand, especially among young professionals and families due to continued urbanisation.

This is well reflected in most local property developers’ focus on this segment. We like Mah Sing Group Bhd (FV: RM1.13) for its quick turnaround strategy. Year-to-date, Mah Sing has acquired three parcels of prime land in Kuala Lumpur for development, targeted at the affordable segment at strategic locations, starting below RM500,000.

We expect the outlook for retail properties, especially malls, to remain stable in the short to medium term. Pavilion Real Estate Investment Trust (REIT) with a target price (TP) of RM1.93 and Sunway REIT (TP: RM1.97) are still enjoying high occupancies in their malls. We believe the high occupancies are also due to strong management and the REITs’ brand names, in addition to shopping complexes becoming one-stop centres providing Malaysians with food and beverage and entertainment options.

We maintained our “neutral” view on the sector as we are not anticipating earnings surprises in the short to medium term. Our top picks for the sector are Sunway Bhd with a “buy” call and an FV of RM1.97, given its local and overseas property launches have been generally well-received due to good locations, and its diversified income base; and IOI Properties (“buy”; FV: RM1.73) banking on strong contributions from its property development projects, particularly those in China and Singapore.

We may upgrade our “neutral” stance for the property sector to “overweight” if banks ease lending policies on properties or consumer sentiments improve significantly. We are keeping our “neutral” view on REITs given their high valuations, and see buying opportunities on weaknesses.