• Maintain BUY, TP rises to MYR1.05 from MYR0.93, 31% upside with c.3% FY24F yield. Sime Darby Property’s 4Q23 earnings beat expectations. Its full-year property sales of MYR3.3bn exceeded management’s original target again. Riding on the strong momentum, management has set a sales target of MYR3bn for FY24, while current bookings have already reached MYR1.9bn. We raise our TP for this stock, in view of the encouraging sentiment on the property market.

• 4Q23 results review. The sequential decline in revenue for property development was due to land disposals amounting to MYR86m – in Sua Betong, Kedah and Victoria Estate, Negeri Sembilan – in 3Q23. Revenue from the property investment and leisure & hospitality segments rose, boosted by the year-end festive season. Meanwhile, SDPR’s share of income from JVs and associates improved QoQ, due largely to a fair value gain on land (from the Industrial Development Fund project with LOGOS). This partly offset the write-down and write-off of inventories arising from the units at Battersea Power Station (BPS) as a result of an increase in inventory value after the capitalisation of high interest cost, as well as the fair value loss on Senada Mall and the commercial space at BPS. Unsold completed inventory fell to MYR243.4m, from MYR283.3m in the previous quarter. Net gearing improved to 0.23x, from 0.27x in 3Q23. A second DPS of 1.5 sen was declared, bringing its full-year DPS to 2.5 sen (vs 2 sen in FY22).

• Surpassed its sales target, as expected. 4Q23 new property sales reached MYR780m vs MYR1.02bn in 3Q23. Of the total sales of MYR3.3bn for FY23 (FY22: MYR3.7bn), residential landed products contributed 36% (MYR1.2bn), while high-rise residential and industrial segments made up 27% (MYR888.5m) and 31% (MYR1.04bn). While the average take-up rates for all products came up to 80%, the take-up rate for residential landed and industrial properties were at 77% and 92%, indicating strong demand.

• MYR3bn sales target for FY24. This may seem slightly conservative, since the company has consistently surpassed its sales targets since FY18. SDPR plans to roll out launches of projects worth MYR3.9bn this year, including MYR1.3bn in GDV for the industrial, MYR1.2bn in GDV for the landed residential and MYR1.2bn in GDV for the high-rise residential segments.

• Forecasts. We raise our FY24-25F earnings by 6-7%, in view of the company’s encouraging property sales prospects. SDPR’s unbilled sales remain relatively unchanged at MYR3.6bn, vs MYR3.7bn as at 3Q23.

• Higher TP. Our new TP (including a 2% ESG premium) is based on a lower discount to RNAV of 55%. We have also trimmed the RNAV contribution from the BPS project, to take into account the persistent risks in the UK.

Source: RHB Research - 26 Feb 2024