KUALA LUMPUR (Oct 12): RHB Research sees value emerging in Malaysian property stocks after the recent sell-off, with the sector now trading at a 60% discount to their revalued net asset value (RNAV), wider than the 50% in May.
The research house attributed the sell-off to rising bond yields and an unpredictable local political landscape, including the recent Johor and Negeri Sembilan state elections.
“We think the negatives are largely priced in, and investors should position for a recovery in value, particularly on stocks that are fundamentally strong, with good earnings visibility supported by strong property sales and unbilled sales,” RHB Research said in a note on Monday.
RHB maintained its “overweight” call on the sector and named Eco World Development Group Bhd (KL:ECWLD) as its top pick, issuing a “buy” call with a target price of RM2.66 — implying a 38% upside from its RM1.93 close on Oct 9.
It favours the developer for its solid execution track record and its position as a key Iskandar Malaysia property play. Eco World’s property sales of RM4.05 billion in the first 10 months of FY2026 have already surpassed its full-year target of RM4 billion, with the southern region contributing almost half.
RHB said news flow in the coming months should centre on Iskandar Malaysia, as the government is set to launch the Johor-Singapore Special Economic Zone (JS-SEZ) master plan in December.
According to the research house, other property players that could benefit from the master plan include UEM Sunrise Bhd (KL:UEMS), Sunway Bhd (KL:SUNWAY), AME Elite Consortium Bhd (KL:AME), Mah Sing Group Bhd (KL:MAHSING) and KSL Holdings Bhd (KL:KSL).
RHB also noted that earnings quality has improved, as several Tier-1 developers now have “counter-cyclical” businesses producing stable recurring income.
For instance, property development contributes only about 20% of Sunway’s group revenue, while IOI Properties Group Bhd’s (IOIPG) property development division now makes up about 50% of its revenue, down from more than 70% two years ago.
Aggregate property sales rose 2.7% quarter-on-quarter and 32% year-on-year in the second quarter of 2026, although demand has softened in the mass segment.
All developers have kept their sales targets unchanged, though some have deferred launches to 2027.
On the policy front, the stamp duty exemption for first-time buyers of homes priced up to RM500,000 — which is now extended to Dec 31, 2030 — will benefit the whole sector, particularly developers of mid-range and affordable homes such as Matrix Concepts Holdings Bhd (KL:MATRIX), Mah Sing and LBS Bina Group Bhd (KL:LBS).
RHB believes other Budget 2027 measures could offset higher mortgage costs, should interest rates rise. These include a minimum wage increase to RM2,000 from RM1,700 effective June 2027, a higher individual tax relief threshold of RM12,000 from RM9,000, a one-percentage-point cut in personal income tax for selected brackets and cash handouts.
However, RHB does not expect the wage hike to materially affect construction costs, as general workers for civil works already earn about RM2,400 a month and skilled workers about RM3,100, according to CIDB data.