Investment Highlights

• We maintain our HOLD recommendation and forecasts on Sime Darby Property (SimeProp) with an unchanged fair value of RM0.64/share based on a 50% discount to its RNAV and a 3% premium for our 4-star ESG rating (Exhibits 2 & 3).

• SimeProp held an analyst briefing last Friday following its 1QFY21 results announcement. Here are the key takeaways:

1) Year to date, development progress is still on track despite various MCOs imposed over the past year. However, the group will monitor closely the situation following the latest standard operating procedures (SOPs) introduced which allow only restricted to “critical repair and maintenance works”, important public infrastructure projects and building jobs.

2) The group has successfully launched projects worth RM111mil in gross development value (GDV) in 1QFY21, which included landed residential in Serenia City and Dayana, Nilai Impian. Both products were well received with take-up rates close to 100%.

3) Moving forward, SimeProp plans new launches amounting RM1.6bil in Guthrie Corridor, Negeri Sembilan and Johor in 2QFY21 and up to RM1.4bil in 2HFY21. 82% of the GDV are residential products which include luxury high rise (particularly, Jendela Residences at KLGCC Resort), landed housing at City of Elmina, Bandar Bukit Raja, Bandar Ainsdale and affordable developments priced below RM400K at Serenia City and Semenyih. The remaining stems from industrial and commercial products at XME Business Park, Nilai and Taman Pasir Putih, Johor.

4) For the group’s 40%-owned Battersea Power Station (in which S P Setia has a 40% stake and EPF 20%) in London, the first group of residents have received their keys and moved in on 24 May 2021 while ongoing construction of Phase 3A, which carries an indicative GDV of £800mil is expected to be completed by the end of the year.

Meanwhile, construction just recently started for Phase 3B, which we understand could have an indicative GDV of £450mil, comprising mainly commercial products. In 1QFY21, the group injected 16% of its £128mil equity commitment into this £9.2bil project, which covers 41.7 acres.

5) SimeProp achieved RM630.2mil (+83% YoY) new sales in 1QFY21, attaining 26% of its unchanged FY21F sales target of RM2.4bil. As a comparison, 1Q accounted for only 13%–17% of FY19–FY20 total sales.

Unsold stocks have fallen by 32% YoY to RM1.9bil, in which landed residential accounts for 27%, high-rise residential 22%, industrial 27% and commercial 16%. Additionally, unbilled sales rose 13% YoY to RM1.7bil as at 31 March 2021, of which 76% will be recognised in FY21.

Source: AmInvest Research - 31 May 2021