FUNDAMENTAL ANALYSIS ON PROPERTY STOCKS LISTED IN KUALA LUMPUR STOCK EXCHANGE (KLSE)

Abstract

The boom in the property market in Malaysia since late 1993, has influenced many listed-companies in KLSE to incorporate property developments as one of their principal activities. This resulted in the property market gaining great momentum in 1994 with on-going announcements of huge commercial and residential developments especially in Klang Valley and Johor Bahru. Malaysia's corporate heavyweights are rushing to invest hundreds of millions, if not billions, of ringgit into commercial and residential sectors in Kuala Lumpur and its suburbs. Consequently, the share prices of those companies which are involved in multi-million ringgit developments have appreciated due to expectations of outstanding financial results. The decisions to invest by investors would then lie on the answers to the following questions: which company to invest in? , what is the rate of return to be expected? and how much are the future earnings of the companies?. In this study, an approach called fundamental analysis will be used to answer the above questions. Fundamentals of the property companies, its growth potential and financial position would be analysed and evaluated. Since fundamental analysis encompasses economic, industry and company analysis, hence the economic performance and property market in Malaysia are evaluated in this study. It is found that although Malaysia is experiencing great economic growth which is favourable to the stock and property market, inflation and huge trade deficit are putting a brake to such growth. Moreover, the rapid developments in the property market are taking its toll on the market and a situation of oversupply outstripping demand in the office, retail and residential markets are greatly anticipated in the next few years. With the aid of fundamental analysis, this study examines the fundamentals, financial position and expected outlook of some property-listed companies in Malaysia. The following companies are recommended for their excellent growth potential and forecasted earnings: Country Heights Holding Berhad and Larut Consolidated Berhad.