Maybank: SMPH, Ayala will pace realty growth

The property sector remains a bright spot for the economy based on the performance of the biggest developers SM Properties Holdings and Ayala Land Inc., according to the research arm of the Kuala Lumpur-based lender Maybank.

Both property issues were rated positive with SMPH as top pick.

Maybank gave forecast earnings of 14 percent year-on-year for both properties firms, with earnings to be largely driven by continued momentum for malls due to increased consumer spending and higher residential pre-sales.

SMPH/ALI are trading at 51 percent to 64 percent discount to restated net asset value (RNAV), representing the level of buying opportunities due to the sector’s growth prospects.

According to Maybank, the sector was a beneficiary of the country’s consumption-driven recovery, with developers’ earnings bases returning to 94 percent of pre-pandemic levels.

Malls led last year’s revenues, exceeding pre-pandemic levels at 110 percent and accounting for 29 percent of sector’s total revenues.

The residential segment also showed a decent recovery, with pre-sales trending at 72 percent to 129 percent of pre-Covid levels.

Offices were resilient, as covered property names secured mostly business process outsourcing and traditional tenants despite high industry vacancy rates in the select cities.

The hospitality industry continued to grow given the gradual return of overseas visitors, Maybank reported.

It added that consumption will remain the growth driver this year.

Spending remains strong

“We expect the full year 2024’s narrative to be divided in two parts: In the first half, we see a continuation of the consumption-driven story experienced in 2022 to 23; and around the third quarter, we expect brighter prospects for the residential segment with rate cuts expected,” Maybank indicated.

Monthly inflation is expected to be stable and the central bank to start cutting policy rates in the third quarter.