Sime Darby Property (SDPR) delivered a 2QFY23 net profit of RM71.1m (- 32.3% YoY, +17.1% QoQ), which contributed to a cumulative 1HFY23 Group net profit of RM131.7m (-16.0% YoY) and constituting about 38% and 43% of our and consensus full year estimates. We deem the results as in line as we expect subsequent quarters to be stronger. Our earnings estimates are kept unchanged for now. In 1HFY23, the Group launched projects valued at RM2.1bn (or already at 70% of full year RM3bn launch target) with average take-up rate at 82%. Group pre-sales recorded totaled RM1.5bn, which is already at 65% of its RM2.3bn sales target for FY23. As such, SDPR revised its sales target of RM2.3bn to RM2.7bn and the GDV launch target from RM3bn to RM4bn. As for valuations, we maintain our Outperform call though we narrow the discount from c.50% to 45%, resulting in a higher TP of RM0.80 (from RM0.70 previously) given its attractive fundamentals.

• 1HFY23 property revenue rose 27% YoY to RM1.3bn, mainly due to a combination of stronger sales and profit contribution from both industrial and residential products. Billings were driven by increase in on-site development activities in Bandar Bukit Raja, Nilai Impian, Elmina Business Park, and Serenia City townships. Elsewhere, it continued to reduce its completed inventories to RM237.7m (from RM277.2m as at 31 December 2022). Net gearing is now at 0.2x. Meanwhile, its unbilled sales stand at RM3.8bn, ensuring revenue visibility for the next three years. We understand bookings are currently at RM1.9bn as at 6 August 2023.

• Eyeing RM2.7bn pre-sales in FY23 (from RM2.3bn). Given the strong sales momentum, the Group has revised its sales target of RM2.3bn to RM2.7bn and the GDV launch target of RM3bn to RM4bn. In 1HFY23, it launched new projects valued at RM2.1bn, which represents 70% of its previous full year launch target of RM3bn. It unveiled about 49% in residential landed, 30% in residential high-rise, 18% in industrial and 3% in commercial. The overall take-up is encouraging at about 82%, on average. We understand that its industrial products achieved an average take-up rate of 88%, with contributions mainly from The Prestige Collection Signature Factories in Elmina Business Park and industrial offerings in Bandar Universiti Pagoh – both fully sold. Elsewhere, XME Business Park Phase 2C in Nilai Impian recorded a 94% take-up rate.

Source: PublicInvest Research - 29 Aug 2023