UOB Kay Hian
11 July 2025

Malaysia Property Sector Set for Rebound: OPR Cut and Iskandar 2.0 Drive New Growth in 2H25

Overview: Falling Rates Spark Optimism in Malaysia Property Market

Malaysia’s property sector is positioned for renewed momentum in the second half of 2025, with a positive outlook anchored by several key catalysts:

• Iskandar 2.0 theme, fueled by foreign direct investment (FDI) in industrial land and heightened residential interest near the Singapore-Johor RTS link
• Resilient mass-market housing segment, supported by declining interest rates
• Revived investment demand for select transit-oriented developments (TODs), backed by improved affordability and enhancements to the Malaysia My Second Home (MM2H) programme

Bank Negara Malaysia’s recent 25 basis point overnight policy rate (OPR) cut is a major tailwind, easing borrowing costs for developers and homebuyers alike and providing a modest boost to sector earnings. UOB Kay Hian maintains an OVERWEIGHT rating on the sector, with top picks including Sunway Bhd, Eco World, and Mah Sing.

Interest Rate Cuts: Boost for Developers and Homebuyers

• The 25bp OPR cut will reduce developers’ borrowing costs and stimulate demand, especially among first-time buyers and upgraders.
• For developers with 40-60% floating-rate debt, a 25bp rate cut is estimated to improve 2026 earnings by less than 2%: SP Setia (c.2%), Sunway (c.1%), and Eco World (c.0.5%).
• For buyers, a similar rate cut on a 35-year RM500,000 floating-rate mortgage would lower monthly repayments by 3.4% (from 4% to 3.75%).
• The 3-month Singapore Overnight Rate Average (SORA) has dropped to 1.98% (from 2.2%/3.0% earlier in 2025), benefitting IOI Properties Group, which holds significant Singapore-based borrowings. A 50bp reduction in rates could save IOIPG around RM50m annually, or 8% of projected FY26 earnings, based on RM15.7b in Singapore borrowings.

Iskandar 2.0: Industrial and Residential Demand in Focus

The Iskandar 2.0 region is expected to regain the spotlight after a market recalibration. While some data centre (DC) land deals stalled in 1H25 due to global cloud players reallocating resources, optimism persists for upcoming DC and industrial land sales.

• SP Setia’s 307-acre Tanjung Kupang land, UEMS’s MOU with Logos Infrastructure Holdco (74 acres), IOIPG’s Kulai and Banting lands (180 acres), and Mah Sing’s venture with Bridge Data Center in SouthVille City were among the deals affected.
• Mah Sing stands out, reporting robust DC land enquiries, likely from hyperscalers, due to its infra-ready status.

Key upcoming catalysts for Iskandar 2.0 include:

• Announcement of the elevated automatic rapid transit (e-ART) system
• Launch of electric train service (ETS) connecting Gemas to Johor Bahru in August 2025
• Release of the Johor-Singapore Special Economic Zone (JS-SEZ) blueprint by end-2025

Sector Valuations and Peer Comparison

The sector’s 12-month forward price-to-book (P/B) ratio has risen to 0.85x but remains below the recent peak of 1.0x in January 2025. Revenue and net profit growth for the sector remain robust, with the following key assumptions:

Top Picks and Target Price Revisions

Following the OPR cut, target prices for major developers have been raised by 2-10%, reflecting a narrowed discount to RNAV of 3-5%. Below are the details for each covered company:

Sunway Bhd (SWB MK)

• Recommendation: BUY
• Target Price: Raised to RM5.81 (from RM5.45)
• Valuation: SOTP-based, implies 27x 2026F PE (+1.5SD above 5-year mean) and 2.1x 2026F PB (+1.5SD above 5-year mean)
• 2024-2026 Net Profit (RMm): 1,005.8 / 1,099.4 / 1,194.0
• 2024-2026 EPS (sen): 15.1 / 16.5 / 17.9
• 2024-2026 PE (x): 32.2 / 29.4 / 27.1
• 2024-2026 ROE (%): 7.0
• Market Cap (RMm): 29,471
• Price/BV (x): 2.1

Eco World Development Group (ECW MK)

• Recommendation: BUY
• Target Price: Raised to RM2.50 (from RM2.39)
• Valuation: 1.5x FY26F PB (+2SD of 10-year mean), 16.9x FY26F PE, reflecting a 17% CAGR (FY25-27F)
• 2024-2026 Net Profit (RMm): 354.2 / 403.2 / 468.7
• 2024-2026 EPS (sen): 11.5 / 12.7 / 14.8
• 2024-2026 PE (x): 18.0 / 16.3 / 14.0
• 2024-2026 ROE (%): 7.9
• Market Cap (RMm): 5,770
• Price/BV (x): 1.2

Mah Sing Group (MSGB MK)

• Recommendation: BUY
• Target Price: Raised to RM1.57 (from RM1.46)
• Valuation: 0.9x FY26F P/B (+1SD of 10-year mean), 12.6x FY26F PE
• 2024-2026 Net Profit (RMm): 240.2 / 289.5 / 313.8
• 2024-2026 EPS (sen): 9.5 / 11.5 / 12.4
• 2024-2026 PE (x): 13.5 / 11.2 / 10.4
• 2024-2026 ROE (%): 7.1
• Market Cap (RMm): 3,047
• Price/BV (x): 0.8

IOI Properties Group (IOIPG MK)

• Recommendation: BUY
• Target Price: Raised to RM2.70 (from RM2.45)
• Valuation: 0.6x FY26F P/B (+1SD of 10-year mean), 22.7x FY26F PE
• 2024-2026 Net Profit (RMm): 638.1 / 408.4 / 654.8
• 2024-2026 EPS (sen): 11.6 / 7.4 / 11.9
• 2024-2026 PE (x): 19.3 / 30.2 / 18.8
• 2024-2026 ROE (%): 1.7
• Market Cap (RMm): 10,847
• Price/BV (x): 0.5

SP Setia Bhd (SPSB MK)

• Recommendation: BUY
• Target Price: Raised to RM2.03 (from RM1.95)
• Valuation: 0.6x FY26F P/B (10-year mean: 0.7x), 14.9x FY26F PE
• 2024-2026 Net Profit (RMm): 621.5 / 662.0 / 681.9
• 2024-2026 EPS (sen): 12.4 / 13.2 / 13.6
• 2024-2026 PE (x): 9.2 / 8.6 / 8.4
• 2024-2026 ROE (%): 4.4
• Market Cap (RMm): 5,603
• Price/BV (x): 0.4

UEM Sunrise (UEMS MK)

• Recommendation: BUY
• Target Price: Raised to RM0.92 (from RM0.86)
• Valuation: 0.7x 2026F P/B (+1SD of 10-year mean), 39.5x 2026F PE (10-year PE: 27x)
• 2024-2026 Net Profit (RMm): 149.8 / 100.7 / 123.5
• 2024-2026 EPS (sen): 3.0 / 2.0 / 2.4
• 2024-2026 PE (x): 26.0 / 38.7 / 31.5
• 2024-2026 ROE (%): 1.4
• Market Cap (RMm): 3,592
• Price/BV (x): 0.7

Lagenda Properties (LAGENDA MK)

• Recommendation: BUY
• Target Price: Raised to RM1.84 (from RM1.78)
• Valuation: 1.3x 2026F PB (+1SD of 5-year mean), 5.8x 2026F PE
• 2024-2026 Net Profit (RMm): 169.0 / 196.7 / 265.1
• 2024-2026 EPS (sen): 20.2 / 23.5 / 31.7
• 2024-2026 PE (x): 6.0 / 5.2 / 3.8
• 2024-2026 ROE (%): 14.4
• Market Cap (RMm): 1,031
• Price/BV (x): 1.0

Matrix Concepts Holdings Bhd (MCH MK)

• Recommendation: BUY
• Target Price: Raised to RM1.70 (from RM1.66)
• Valuation: 1.4x 2026F P/B (+2SD of 10-year mean), 12.4x 2026F PE
• 2024-2026 Net Profit (RMm): 203.0 / 257.8 / 268.1
• 2024-2026 EPS (sen): 11.4 / 13.7 / 14.3
• 2024-2026 PE (x): 12.1 / 10.0 / 9.7
• 2024-2026 ROE (%): 11.0
• Market Cap (RMm): 2,515
• Price/BV (x): 1.1

RNAV Discount Revisions

Discount rates for property RNAV have been narrowed across the board:

Industrial and Data Centre Land Sales: Pipeline and Timelines

Developers are ramping up launches in Johor, especially near the RTS station in Bukit Chagar. Key industrial land sales and their recognition timelines include:

Potential upcoming industrial land sales:

• IOI Properties: Targeting at least a 300-acre industrial land sale in Kulai in 3Q25
• SP Setia: Targeting industrial land sales in Tanjung Kupang by end-25
• Mah Sing: Offer letters issued to two DC players for a 42-acre DC land sale in Meridin East
• Eco World: EBP7 launch expected by end-25
• UEM Sunrise: Ongoing MOUs with Etramax (China-based battery manufacturer) and Guocoland (mixed development in Gerbang Nusajaya and Puteri Harbour)

Residential and Non-Residential Loan Trends

Residential property loan applications grew 2.5% month-on-month in May 2025 but were down 5.6% year-on-year, resulting in a modest 0.2% year-to-date growth. Non-residential loan applications dropped 5.1% sequentially in May but maintained a 6.7% year-on-year growth for the first five months of 2025. This suggests:

• Residential loan applications are likely to remain flat for 2025 due to a high 2024 base.
• Non-residential loan growth is expected to continue, driven by industrial activity and FDI inflows.

Upcoming Residential Launches and Market Demand

A surge in launches is expected in 2H25, especially in Johor:

• Sunway Bhd: SOHO units at Sunway Majestic (RM800 psf) launching July 2025
• Mah Sing: M Grand Minori premium serviced apartments launching August 2025
• Eco World: Eco Botanic 3 launching 1Q26
• UEM Sunrise: Estuari Greens and Estuari ParkHomes launching 4Q25
• Sunway: Sakura, Lenang Heights, L8 projects also in the pipeline

These launches are expected to be well absorbed, thanks to:

• Ongoing infrastructure progress, enhancing cross-border connectivity
• Growing industrial activity under the JS-SEZ initiative between Singapore and Johor

Resilience in Mass-Market Housing and Foreign Investment

The mass-market housing segment remains robust, supported by:

• Increasing number of first-time buyers
• Minimum wage hikes
• Developers like Mah Sing (52%/37% of products priced

Signs of renewed foreign investment are emerging, particularly in high-rise TODs. Feedback suggests new interest in projects such as E&O’s The Conlay and SWNK Houze @ BBCC, both with direct access to MRT/LRT stations.

Sector Earnings Outlook and Key Risks

For 2025, sector earnings are forecast to rise 7.4% year-on-year, with revenue up 10.3%. However, net margins may dip slightly due to record-high land sale recognition in 2024, especially for SP Setia and UEMS, while Lagenda may see margin compression as new townships enter the construction phase.
Key risks include:

• Unsuccessful execution of infrastructure or property-related developments
• Negative newsflow or macroeconomic uncertainty affecting take-up rates
• Unexpected spikes in building material costs
• Impairments on receivables and completed inventories

Conclusion: A Positive Outlook for 2H25 and Beyond

The Malaysia property sector is poised for a gradual but sustained recovery, underpinned by falling interest rates, industrial growth, and infrastructure-driven demand. With developers ramping up launches and investors regaining confidence, the sector provides attractive opportunities—especially among those with strong exposure to the Iskandar 2.0 theme and robust mass-market offerings.
Top picks—Sunway Bhd, Eco World, and Mah Sing—are best placed to capitalize on these trends, supported by upward earnings revisions and valuation re-ratings in response to favorable macro and sectoral developments.