Investment Highlights

• We maintain our HOLD recommendation on Sime Darby Property (SimeProp) with an unchanged FV of RM0.60 based on a 60% discount to RNAV (Exhibit 1). We make no changes to our FY20–FY22 net earnings forecast.
   
• SimeProp held an analyst briefing yesterday to shed more light on its recently announced 1HFY20 results. Here are the key takeaways:

1) Sales target. SimeProp chalked up new sales of RM712.5mil in 1HFY20 whereby 45% are derived from newly launched landed residential projects namely Ilham Residences in Elmina East and Lumira 1 in Bandar Bukit Raja 2 & 3. Management guided a sales target of about RM1.4bil–RM1.6bil for FY20.

2) Unbilled sale increased by 4.9% QoQ to RM1,538.5mil, of which 72.7% were from projects in flagship townships (Elmina West, Bandar Bukit Raja and Serenia City).

3) New launches and take-up rates for 1HFY20. SimeProp launched projects worth RM587.3mil in GDV in 1HFY20 with its main focus on landed residential properties. These new launches received bookings of between 74% and 85%. Meanwhile, the company is planning to launch new projects worth RM1bil in GDV for 2HFY20.

4) Efforts to reduce inventory levels. SimeProp will carefully review its new launches, taking into account of its existing inventory level. Completed inventories were reduced by 22.6% YoY to RM674.8mil.

5) Key priorities for FY20. The company’s immediate priorities for FY20 will be on cash flow management, active marketing and sales campaigns, inventory management and cost reduction. SimeProp will remain focused on growing its core development business by offering properties within the affordable and mid-range price points in strategic locations.

• To recap, SimeProp registered a core net profit of RM53.1mil (-77.8% YoY) for 1HFY20. The lower earnings are mainly due to the impact of the movement control order (MCO) and share of loss from JV projects.

• We believe the long-term outlook for SimeProp remains stable, premised on inventory-clearing activities and a healthy balance sheet. As there is little upside potential, we maintain our HOLD recommendation on SimeProp.

Source: AmInvest Research - 28 Aug 2020