Sime Darby Property’s (SDPR) 2QFY21 net profit came in weaker than expected at only RM19.9m (+121.4% YoY, -67.2%QoQ) mainly due to the implementation of the full movement control order (FMCO) and enhanced MCO (EMCO) especially in the Klang Valley. In 1H2021, Group net profit of RM80.5m (+189.2% YoY) missed expectations at c.21% and c.25% of our and consensus full year estimates. We expect billings and property sales to be slow in the subsequent quarters due to the strict standard operating procedures which mandates only 60% work capacity for construction sites under FMCO (stop work orders for EMCO areas) and closure of sales galleries. As such, we cut our FY21/22 earnings by 40%/5% to account for lower margins and change of billing assumptions. Separately, new sales achieved in 1HFY21 were RM1.31bn, with c.70% sales from residential and industrial products. Unbilled sales as at 30 June 2021 stood at RM1.83bn or +10.8% YoY. Maintain Outperform with unchanged RM0.79 TP, pegged at c.70% to its RNAV

• 2QFY21 revenue rose 74.5% YoY to RM502.8m despite imposition of the Movement Control Order (MCO), mainly contributed by property development (+104.7% YoY) that constituted 93% of Group’s revenue. However, Group revenue in 2QFY21 dropped 14.7% QoQ due to the re imposition of MCO that impacted all business segments. In 1HFY21, Group PBT improved by >2x to RM152.3m from a loss last year due to the improved revenue.

• Sold c.RM1.31bn in 1HFY21. We understand that residential landed products remained as key sales contributor mainly from City of Elmina (RM368.5m), Bandar Bukit Raja (RM118.6m) and Serenia City (RM86.3m). Meanwhile, industrial products remained as the second highest sales contributor (~18%) with sales contribution mainly from Elmina Business Park (RM160.0m) while residential high rise contributed c.16% of total sales mainly from KL East / Taman Melawati (RM52.5m) and KLGCC Resort (RM48.4m). Unbilled sales level as at 1HFY21 stood at RM1.83bn with c.35% of the unbilled sales to be recognised by FY21.

• RM2.1bn of new projects to be launched in 2HFY21, with RM988m to be unveiled in 3QFY21 and the remainder in 4QFY21. We understand that the Group has launched 1,577 units with gross development value (GDV) of RM1.4bn in 2QFY21; bringing 1HFY21 total to RM1.6bn GDV and 1,806 units with average take-up rate of c.89%. Among the key launches in 2H include KLGCC Resort (Jendela Phase 2), commercial projects (Bandar Bukit Raja, Bandar Universiti Pagoh and Subang Jaya City Centre), residential landed (Nilai Impian 2, Bandar Bukit Raja and Bandar Ainsdale) and industrial products (Nilai Impian 2 and Elmina Business Park).

Source: PublicInvest Research - 27 Aug 2021