For the property sector, demand should be supported by an improving economic outlook, rising income levels, inflationary fears (property is perceived as a good hedge against inflation), and a young population (50% below 21 years of age). The mass residential segment should still be supported as those who need to buy properties would still do so. Our top property pick is SP Setia (TP: RM4.80).
Construction sector picking up
We understand there has been a pick-up in the number of construction tenders as we approach the final months of the Ninth Malaysia Plan. Although competition remains keen, we see more positive project newsflow for the sector and hints of the Tenth Malaysia Plan (to be released in June 2010) in the coming months.
IJM Corp (Buy; TP RM6.00) remains our top pick in the sector and the safest proxy to the sector, because of its existing strategy to bid for a large pool of contracts. Moreover, its earnings base is the most diversified in our construction universe. Trading at 14x FY11 PE and 1.1x P/NTA vs its 1-SD historical averages of 18x and 1.3x, valuations are attractive. We also like MRCB (Buy; TP RM2.25) and Gamuda (Buy; TP RM4.45) for exposure to the sector.
by HWDBS
