Booming Sabah property market

By BUSINESS TIMES

THE untold story of Sabah property developers could be the new catalyst that will provide an edge to property stocks once the stock market recovers from its short-term bearish position.

“The recent sell-down in the broader market, seems to suggest that a sharp spike is in the offing. Sabah property developers could be leading the charge,” said a dealer with RHB Securities.

Analysts who cover the property sector said even at the height of the bull run, there was no premium attached to Sabah property developers.

Not many in the market realise that in areas such as Kota Kinabalu prices of properties match that of Penang and Kuala Lumpur.

According to a HwangDBS report, the value of property transactions in Sabah had more than doubled over eight years to a record RM4.4 billion in 2011.

Transaction volume in 2011 averaged at RM429,000 or some 34 per cent higher than Malaysia’s average purchase price per property of RM319,000.

Mercury Securities head of research Edmund Tham said no premium was given to property developers with projects in Sabah because their total contribution to the company’s total turnover might still be negligible.

Among the developers which have recently turned their attention to Sabah as the next prime frontier are SP Setia Bhd – the country’s largest propert developer by sales – and Mah Sing Group Bhd.

SP Setia, for example, is undertaking a commercial project on some 24.12ha of land near the Kota Kinabalu airport.

The project, with a gross development value of RM1.7 billion, consists of redeveloping a train station and an adjacent land.

The mixed-development includes retail, office and residential units .

The train station covers about 7.24ha, while the remaining 16.88ha is allocated for SP Setia’s remaining development at Aeropod.

Mah Sing will be developing the Kota Kinabalu Convention City (KKCC) in Sabah with an estimated GDV of RM1.4 billion, starting next year.

The whole project is expected to be completed in five years’ time.

Interest is not just centred in Kota Kinabalu, but has spawned to other areas.

For example, in July, a record-breaking RM79 million worth of properties were sold at the final installment of The Property Investment and Home Expo (PIHex) in Tawau.

Tham said one of the up-and-coming players in the future is Permaju Industries Bhd.

This year, the company inked a 20-year pact with Mydin Mohamed Holdings Bhd to lease a hypermarket in Kota Kinabalu.

The hypermarket will be located at its project site known as Princess Heights.

Earnings from Permaju’s maiden property project are expected to kick in next year, and the company will be among the first major property playersto see a huge chunk of its earnings coming from the Sabah property market, said Tham.

Analysts said the biggest winners will be Sabah companies with existing landbank.

HwangDBS, in its report early this year, listed Suria Capital Bhd and Hap Seng Consolidated Bhd as among the potential winners.

Suria is the largest port operator in the state and its RM2 billion Jesselton Waterfront project could be a game changer for the company.

Meanwhile, Hap Seng has some 1,005ha of land that could be used for property development.

– Malaysia Property News

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