Sime Darby Property - Lifted by Asset Sale

Date: 30/05/2019

Source  :  PUBLIC BANK
Stock  :  SIMEPROP       Price Target  :  1.30      |      Price Call  :  BUY
        Last Price  :  1.02      |      Upside/Downside  :  +0.28 (27.45%)

Sime Darby Property (SDPR) registered 1QFY19 net profit of RM265.1m (+687.3% YoY, NM QoQ) which was above our and consensus expectations. This was primarily due to profit from sale of its Darby Park Executive Suites in Singapore for SGD93m which resulted in a disposal gain of SGD67.3m (or c.RM204.3m). The strong first quarter net profit constituted c.56% and c.59% of our and consensus full year estimates. As such, we adjust our FY19/FY20 numbers by +15%/-13% to account for the gain of disposal and change of billing assumptions. We understand that the Group also completed the disposal of 300 acres of land in Kedah (sold for RM89m to Zhejiang XSD Holding Group Co) which will be recognized in 2QFY19. We maintain our Outperform recommendation but reduce our TP to RM1.30 (from RM1.90 previously), pegged at higher c.60% discount to our RNAV estimates given the prolonged headwinds facing the sector currently.

  • Property development division saw its operating profit leap by almost 4x to RM71.4m due to higher sales from Serenia City and Cantara Residences and higher billings from Bandar Bukit Raja townships. In 1QFY19, the share of losses from Battersea was RM5.6m as compared to the RM2m loss a year ago. As for property investment, the business division registered a lower profit of RM6.6m vis-à-vis RM7.5m a year ago due to lower facility and asset management income.
  • Still eyeing RM2.3bn new property sales in FY19. We understand that the Group launched a total of 474 units with a combined GDV of RM363m in 1QFY19 and an additional 600 units worth some RM550m in April alone. Hence, we believe the Group would accelerate its property launches in the upcoming quarters. The recent launches are said to have received take-up in excess of 70% on average. As at 1QFY19, its unbilled sales stood at RM2.1bn, down from RM2.2bn in Dec 2018.

Source: PublicInvest Research - 30 May 2019

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