UOB Kay Hian
Date of Report: Friday, 12 September 2025
Malaysia Property Sector 2Q25: Transaction Momentum, Industrial Demand, and Top Picks for 2H25

Overview: Property Sector Maintains Momentum Amidst Rising Industrial and Johor Demand

Malaysia’s property sector delivered broadly in-line results for 2Q25, with a notable uptick in transaction value and volume, underpinned by industrial segment resilience and strong demand in Johor. Despite some earnings misses, the outlook remains bullish with OVERWEIGHT retained on the sector. The report highlights robust foreign direct investment (FDI), resilient industrial land absorption, and mass-market housing as foundational growth drivers for the remainder of 2025. Top picks include Sunway Bhd, Eco World, and Mah Sing, who are poised to benefit from sectoral catalysts and government initiatives.

2Q25 Sector Results: Revenue Up, Profits Down – Key Themes and Performance

The 2Q25 earnings season saw a mixed bag: four companies met expectations while three missed. Despite a 15% year-on-year (yoy) rise in property revenue, sector core net profit fell 29% yoy, primarily due to reduced land sales from SP Setia and higher finance costs at IOIPG. Specific misses were attributed to higher-than-expected expenses (Sunway and SP Setia) and slower revenue recognition (Lagenda). Notwithstanding, the sector is expected to accelerate in the second half of 2025, fueled by stronger launches, sales, and continued industrial demand.

Transaction Data: Industrial and Johor Segments Shine

– Property transaction value surged 14% yoy to RM56.3b in 2Q25, with transaction volume up 4% yoy to 98.5m units. – The industrial segment showed exceptional strength: transaction value and volume rose 11% and 18% yoy, respectively. – Johor’s transaction volume rebounded sharply to 17% yoy from a -3% decline in 1Q25, while Klang Valley’s contraction narrowed significantly. – Residential transaction value and volume both increased by 3% yoy, reflecting continued support for mass-market housing.

Overhang and Supply: Unsold Units Rise, But No Alarm

– Malaysia’s completed but unsold units (overhang) rose to 26,911 (+19% yoy; +14% qoq), largely due to a 36% yoy and 255% qoq jump in project completions. – Johor’s overhang remained stable at 3,209 units (-0.3% yoy; +6% qoq), even with a significant increase in completions (+26% yoy; +83% qoq), indicating robust demand supported by the Johor-Singapore Special Economic Zone (JS-SEZ). – The house price index in Johor rose 6% yoy but dipped 2% qoq, suggesting healthy demand normalization after a strong 1Q25.

Valuation and Peer Comparison: Attractive Upside for Key Players

The sector’s valuation remains compelling, with most stocks trading below historical price-to-book (PB) and price-to-earnings (PE) averages. Here’s a detailed peer comparison:

Key Company Analysis and Sector Outlook

Sunway Bhd: Healthcare IPO and Singapore Expansion to Drive Growth

– Sunway’s SOTP-based target price is RM5.70, reflecting 33x 2026F PE and 2.4x 2026F PB, both well above historical averages due to expected strong earnings. – A major catalyst is the upcoming healthcare listing in 1Q26, with an estimated 3% distribution yield via distribution-in-specie of Sunway Healthcare Holdings shares. – Sunway’s joint venture with Sing Holdings secured a second parcel at Chuan Grove, Singapore, for S\$623.9m (RM2.05b), at a competitive price of S\$1,331 psf ppr. – The project could add S\$9m-13m (RM30m-43m) annually over five years, based on a 35% stake and 10-15% net margin, equating to 2-3% of 2027 earnings forecast.

Eco World Development: Recurring Income and Earnings Growth

– Target price of RM2.50 is based on a 32% discount to RNAV, implying 1.5x FY26F PB and 16.9x FY26F PE. – Strong 17% CAGR forecast for FY25-27, with structural uplift in earnings from recurring data centre rental income.

Mah Sing Group: Value Play with Solid Sales, Healthy Gearing

– Target price is RM1.57 (37% discount to RNAV), implying 0.9x 2026F PB and 12.6x 2026F PE. – Mah Sing stands out for solid property sales, robust take-up rates, and low net gearing (0.2x as of June 2025). – Potential catalyst is the finalization of a data centre land sale by year-end.

Other Notable Players

– Matrix Concepts: Offers 23.2% upside, 10.0x 2025E PE, and 5.2% yield. – IOI Properties Group: Attractive 24.8% upside, with 31.0x 2025E PE, 3.7% yield, and a large market cap. – Lagenda Properties: Highest upside at 54.0%, 5.1x 2025E PE, and strong 7.2% yield. – SP Setia: 48.0% upside, 10.3x 2025E PE, and 2.4% yield. – UEM Sunrise: 29.6% upside, 35.7x 2025E PE, and 2.1% yield.

Sector Catalysts and Risks

Key Catalysts:

• Falling interest rate environment.
• JS-SEZ-driven demand for industrial land and related developments in Johor.
• Infrastructure advancements boosting transit-oriented development.
• Budget 2026 expected to emphasize affordable housing and financing for first-time buyers.

Risks:

• Execution risk for infrastructure or property projects.
• Slower-than-expected take-up rates due to macroeconomic uncertainty.
• Potential spikes in building material costs.
• Impairments on receivables and completed inventories.

Conclusion: Sector Remains Attractive, Top Picks Well-Positioned for 2H25

Malaysia’s property sector is set for a stronger second half of 2025, with industrial and Johor segments continuing to underpin growth. Despite some profit declines, valuations remain attractive and sector fundamentals are robust, especially for Sunway, Eco World, and Mah Sing. With falling interest rates, strong FDI, and government support for affordable housing, investors should keep a close eye on these top picks for potential outperformance through the rest of the year.