Sime Darby Property (SDPR) announced that it is exercising the call option agreements (COA) between Sime Darby Property and Kumpulan Sime Darby Berhad (KSDB) which had been previously disclosed in the prospectus of Sime Darby Property dated 28 November 2017 issued pursuant to its initial public offerings. As such, it has now entered into a sale and purchase agreement with KSDB to acquire part of the Lot 3235 option land measuring 760.12 acres for RM280m (or RM8.46psf). We understand that the said land is located within the regional development of Malaysia Vision Valley 2.0 and located adjacent to Bandar Enstek. Pending more information, we maintain our earnings estimates for now. Reiterate Outperform with unchanged RM0.79 TP, pegged at c.70% to its RNAV.

• Land option. We understand that the new “option land” consists of a portion of the Lot 3235 plot measuring 656.05 acres which KSDB had offered to Sime Darby Property pursuant to the sale notice, and an additional portion of the Lot 3235 option land measuring 104.07 acres based upon Sime Darby Property’s exercise of its option to purchase under the Lot 3235 COA. The additional land, we understand, will provide more strategic positioning and further enhance the area’s future development value.

• Land valued at RM8.46psf. The said land is valued at a combined RM280m or RM8.46psf based on the latest valuation for the 760.12-acre land. Details are still light at this juncture but we understand that the adjacent Bandar Enstek which is 5,119 acres has an estimated RM9.2bn GDV. Hence, we estimate the said land could yield at least RM1.4bn GDV (or c.20% land cost) which suggests that the price paid for the land appears to be fair.

Source: PublicInvest Research - 28 Oct 2021