We like Sime Darby Property (SDPR) for its strategically located landbank (at low prices) and its strong balance sheet (net gearing of 0.27x). We believe that after the kitchen-sinking exercise of writing off more than RM550m last year, the Group is emerging stronger with focus on digitalisation and cost & operation efficiency. The Group will also grow its industrial and logistics developments to support new sales for the year. It has total landbank of c.20k acres with gross development value (GDV) in excess of RM80bn. Also, we believe asset monetization via outright land sale is also possible this year as evidenced by similar move by its peers such as SP Setia and UEM Sunrise to unlock strategic land value. Sales achieved in 1QFY21 were RM630.2m or c.26% of its FY21 sales target of RM2.4bn with unbilled sales rising slightly to RM1.7bn, from RM1.58bn a quarter ago. All told, we upgrade SPDR to Outperform with an unchanged RM0.79 TP, pegged at c.70% to its RNAV.

• Sold c.RM630.2m in 1QFY21. We understand that residential landed products remained as the key sales contributor for the Group, mainly from City of Elmina (RM142.9m or 22.7% of total sales), Serenia City (RM50.9m or 8.1%) and Bandar Bukit Raja (RM20.5m or 3.3%). Industrial products were the second highest sales contributor (from third highest in 4QFY20), with sales contribution mainly from Elmina Business Park (RM101.5m or 16.1% of total sales) underpinned by commercial products at Senada at KLGCC Resort (RM85.8m or 13.6% of total sales). Unbilled sales level as at 31 March 2021 stood at RM1.7bn, a QoQ increase of 4.8%.

• To launch another RM3bn of new projects. In 1QFY21, the Group launched RM111m worth of properties with encouraging take-up rate of more than 90%. For the remaining quarters, it has lined up projects with a combined GDV of c.RM3bn to be unveiled. In 2QFY21 alone, it has projects worth RM1.63bn to be launched which among others include luxury high-rise Jendela Residences at KLGCC Resort, new phases at City of Elmina, Bandar Bukit Raja & Bandar Ainsdale and introducing a new industrial township measuring >400 acres.

Source: PublicInvest Research - 18 Jun 2021