PROPERTY developers have been reporting materially lower earnings for fiscal year 2016 as they struggled to sell properties amid a slowdown in the market.
Analysts think they can do better in the future as the market is expected to rebound in the second half of this year, or at least by early next year.
They suggest developers tweak their business strategies in order to sustain earnings.
These include expanding their product portfolio to mass-market housing, venturing overseas where there is demand for mid- to high-end properties and revising annual targets.
“While diversifying your portfolio may not be the sexiest of investment topics, especially under the current economic climate, it can be the most important component to help the companies reach their long-term financial goals,” said the analysts.
Mah Sing Group Bhd, which has more than 30 ongoing projects, cut its sales target for this year to RM1.8 billion, from RM2.3 billion previously. Last year, it sold RM1.78 billion worth of properties.
The developer is looking at expanding its landbanking initiatives to help boost future earnings.
Kenanga Research, in a report last year, said Mah Sing was “biting the bullet” by being prudent with the revision.
UEM Sunrise Bhd, builder of luxury properties, recently reported a lower net profit for fiscal 2016. This was mainly due to weaker performance of joint ventures and associates and the absence of several one-off items, which were recorded in the previous financial year.
Net profit fell 42.7 per cent to RM147.4 million, from RM257.2 million, although revenue was RM1.84 billion, five per cent higher than the RM1.75 billion in 2015.
Analysts said although UEM Sunrise’s net profit was down to RM147.4 million, it was still at a healthy level compared with its competitors.
Its total property sales last year were RM1.36 billion, 37 per cent higher than its sales target of RM1 billion.
Higher sales were driven by its projects in Johor that contributed RM686.8 million, or 50 per cent, to total sales, compared with 12 per cent in 2015.
Property sales from the central region and international business accounted for 25 per cent each of total sales for the period.
Conservatory, an exclusive high-rise residential development in Melbourne, Australia, was the main contributor to international sales.
UEM Sunrise will be focusing on affordable and landed mid-market type of residential developments in Malaysia, and launch new luxury projects overseas, especially in Australia.
Its sales target for fiscal year 2017 is RM1.2 billion, but analysts expect it could be more.
As of February 28 this year, the consensus forecast among 14 analysts covering UEM Sunrise recommended a “hold” on the company’s shares.
I-Berhad, which is developing the RM9 billion i-City project in Shah Alam, recently posted a 54.88 per cent jump in net profit for fiscal year 2016 to RM66.6 million. Its revenue rose 49 per cent to RM383.6 million.
The company underscored its record-achieving profit last year with RM333 million in new property sales compared with the previous year.
PublicInvest Research said growth was still on track for I-Berhad.
“I-Berhad’s numbers for last year came in below our expectations, with revenue and net profit at only 76 and 78 per cent of full-year estimates, respectively, due to certain construction delays that hampered billing progress and the slower rate of approvals for mortgage loans.”
The research house expects an improvement in market conditions to lift contributions progressively for I-Berhad from its two ongoing projects, namely i-City and 8Kia Peng @ KLCC.