Developers deliberating whether to launch or defer new projects

Developers deliberating whether to launch or defer new projects


The majority of developers in Malaysia are still deliberating on whether to continue or defer future launches.

AmInvestment Bank Bhd (AmBank) analyst Thong Pak Leng said the Covid-19 breakout has caused a major upheaval in the global economy.

Malaysia's movement control order (MCO) which was put in place from March 18 to May 12, 2020, has put the economy in a pause for almost two months.

"Developers are assessing the current economic situation. We believe consumer sentiment remains weak for the time being with spending mainly focused on necessities while big-ticket items such as properties take a back seat," said Thong in a note.

The research house maintained its "neutral" view on the local property sector as it believes the outlook will remain challenging for the next 12 months, and it does not anticipate earnings surprises in the short to medium term.

Thong said developers under the firm's coverage have reasonable amount of unbilled sales and expect that they will remain profitable in the financial year 2020 (FY20) and FY21.

He said companies like S P Setia Bhd, Malaysian Resources Corp Bhd, and Eco World Development Group Bhd (EcoWorld) have many projects still in their early stages, hence the firm does not expect strong revenue recognition in the next 12 months.

"On the other hand, we remain cautious about the financial leverage of some companies as it is one of the key factors to their survivability during an economic downturn. Based on our data, the net gearing of developers under our coverage is still under control, averaging at about 36 per cent while interest coverage remains strong at about eight times," he said.