In a recent note, the firm said that property developers are likely to see earnings growth in the upcoming second quarter of 2024 (2QCY24).
"This is on the back of higher recognition from property projects as labour shortage issues are resolved while earnings outlook is also supported by improving new property sales," it said.
MIDF Research noted its top picks for the sector are Mah Sing Group Bhd and Matrix Concepts Holdings Bhd.
"We like Mah Sing as its new sales outlook remains resilient, driven by strong demand for its affordable residential projects.
"Besides, its healthy balance sheet with low net gearing of 0.06 times provides financial muscles for the group for aggressive land banking, with the latest landbank acquisition in Taman Desa announced recently," it added.
The firm also highlighted that Mah Sing's recent data centre project is making good progress, with the company in advanced discussions with another data centre operator for its second land parcel at Mah Sing DC Hub @ Southville City.
MIDF Research said it likes Matrix Concepts, citing a strong earnings catalyst from its 2,382 acres of land in MVV 2.0.
"Besides, the growth of Bandar Sri Sendayan will remain stable due to strong demand for affordable landed houses. Meanwhile, the dividend yield of Matrix Concepts is attractive, estimated at 5.7 per cent," said the firm.
Meanwhile, MIDF Research expects the appreciation of the ringgit to have a neutral effect on property companies, as their revenue and costs are primarily in ringgit, except for those with overseas market exposure.
IOI Properties Group Bhd has ventures in China and Singapore, S P Setia Bhd has exposure in Australia and the UK, while Sunway Bhd has presence in Singapore and China.
"Based on sensitivity analysis of earnings to forex changes, the impact of every one per cent strengthening of ringgit is expected to have a minimal earnings impact of less than three per cent to financial year 2024 (FY24) earnings of the property companies.
"Overall, the earnings contribution of the property companies is largely from local projects; hence, we do not expect significant earnings impact from the appreciation of ringgit," MIDF Research said.
