Investment Highlights

• We maintain our HOLD recommendation on Sime Darby Property (SimeProp) with an unchanged fair value of RM0.90 based on a 50% discount to RNAV (Exhibit 1). We made no changes to our FY19–21 earnings forecasts.

• SimeProp held an analyst briefing yesterday to shed more light on its recently announced 9MFY19 results. Here are the key takeaways: 1) Sales target. SimeProp chalked up new sales of RM2.25bil in 9MFY19 and is on track to achieve its sales target of RM2.3– 2.5bil for FY19 whereby 58.9% were derived from landed residential properties.

2) Unbilled sale increased by 5.7% from Dec 2018 to RM1,562.4mil due to sales recorded during Primetime 8 and Spotlight 8 campaign. Elmina West, Bandar Bukit Raja and Serenia City townships made up 63% of the unbilled sales.

3) New launches for 4QFY19. SimeProp is targeting to launch projects worth RM830mil in GDV in 4QFY19 with its main focus on landed residential properties. So far, SimeProp has launched GDV amounting to RM1,389.1mil in 9MFY19.

4) Efforts to reduce inventory levels. SimeProp will carefully review its new launches, taking into account of existing inventory level. Completed inventories were reduced by 28.6% to RM622.4mil since Dec 2018. Meanwhile, value for unsold units was 31.3% lower to RM844.6mil for the same period.

5) Expanding industrial segment. SimeProp is planning to expand into the growing industrial and logistics development segment which includes build-to-suit, lease assets and managed industrial parks in City of Elmina and Bandar Bukit Raja. The SimeProp-Mitsui & Co JV has unveiled Bandar Bukit Raja Industrial Gateway where it will be building on a 39-acre land with GDV of RM530mil.

• To recap, SimeProp registered a core net profit of RM274.8mil (+152.5% YoY) for 9MFY19, mainly attributed to property development contribution from Bandar Bukit Raja, Denai Alam, Nilai Impian/Utama townships and Cantara Residences in Ara Damansara but lower contributions from Elmina and Bandar Universiti Pagoh townships.

• We believe the outlook for SimeProp remains stable, premised on good take-up rates, particularly Serenia City, inventoryclearing activities, overseas contribution in 4QFY20 and a healthy balance sheet. As there is little upside potential, we maintain our HOLD recommendation on SimeProp.

Source: AmInvest Research - 29 Nov 2019