Investment Highlights

• We maintain BUY on Sime Darby Property (SimeProp) with a higher fair value (FV) of RM0.69/share (from RM0.63/share previously) due to rolled-forward RNAV-based valuation to FY24F. Our FV is based on a 55% discount to our revised RNAV and a 3% premium for our 4-star ESG rating (Exhibits 5, 6).

• The FV implies a FY24F PE of 12x, at parity to the average for larger cap property stocks currently.

• SimeProp’s FY22 core net profit (CNP) of RM295mil beat expectations. It was 18% above our forecast and 21% above street’s.

• The variance to our forecast was mainly due to stronger-thanexpected property sales in 4QFY22.

• Hence, we raise FY23F/FY24F CNP by 29%/13% to reflect improving sales prospects as well as stronger revenue recognition from progress billing, which is supported by its robust unbilled sales.

• In FY22, the group’s property development PBT improved 61% YoY. This was on the back of YoY revenue growth of 23% as a result of higher property sales of industrial and residential products, coupled with higher on-site development activities of its projects towards the end of the year.

• Earnings from property development were further boosted by land sales in Selangor, Sabah and Kedah together with monetisation of inventory (Exhibit 4).

• SimeProp’s FY22 launches of RM2.6bil (vs. RM3.7bil in FY21) accounted for 93% of its earlier target of RM2.8bil. This consists of a diverse mix of residential and industrial projects at a ratio of 54% to 46%. Its residential landed products recorded a notable average take-up rate of 89%

• SimeProp achieved commendable new sales of RM3.7bil (+23% YoY) in FY22, surpassing its earlier sales target of RM2.6bil (Exhibits 3).

• Its strong bookings of RM1.8bil as at 5 February 2023 and high bookings to sales conversion rate of 70%–80% will further support its sales prospects in FY23F.

• Meanwhile, the group’s unbilled sales expanded 3% QoQ to RM3.6bil, which represents a cover ratio of 1.2x of FY23F revenue (Exhibits 3).

Source: AmInvest Research - 1 Mar 2023