KUALA LUMPUR: About half of the listed companies on Bursa Malaysia’s KL Property Index are now trading at price to book value (PBV) ratio multiples of less than 0.30 times.
Kenanga Research said this signaled that this could be a conducive environment for privatisation exercise or takeovers.
Smaller sized property companies like MCT Bhd, SHL Consolidated Bhd, MUI Properties Bhd and KSL Holdings Bhd could be potential takeover targets.
Kenanga Research said since 2018, there were at least 10 listed property companies seeing takeover offers.
These offers were priced at PBV valuation range of between 0.18 times and 1.47 times, the firm said today.
Their financial position was relatively strong with net gearing of less than 0.35 times (except for two cases) with three of the 10 companies in net cash positions.
"With property stocks badly battered following the market sell-off, this has opened up a window of opportunities for substantial shareholders to privatise their listed companies at bargain basement prices.
"Logically speaking, the suitable privatisation targets would be companies that are already trading at distressed PBV valuations but financially sound with net cash/low net gearing positions. An added pull factor is the cheap funding options available amid softer interest rates,” Kenanga Research said.
The firm reaffirmed its “overweight” call on the property sector, with Sime Property Bhd and IOI Properties Group Bhd being among its top picks.
AmInvestment Bank Bhd recently said if the current economic condition persisted, property companies would still trade at their current P/BV levels.
The bank said most developers were trading at a P/BV of 0.2 times to 0.4 times, with the exception of Sunway Bhd (0.88 times).
Based on historical numbers, Malaysian property developers traded in the range of 0.19 times to 0.8 times in 1998 and 0.17 times to 0.85 times in 2008 at their all-year low levels.
Bursa Malaysia’s KL Property Index yesterday closed 0.54 per cent or 3.19 points to 592.25, down from a high of 815.40 points on March 13 this year.
MCT closed 1.0 sen, or 5.71 per cent, higher to 18.5 sen, SHL remained unchanged at RM1.91, MUI Properties remained unchanged at 19 sen and KSL closed 0.5 sen, or 0.9 per cent, lower to 56.5 sen.
