Sime Darby Property (SDPR) reported stronger than expected numbers in 1QFY24, with Group net profit more than doubling to RM123.6m (+103.7% YoY, -5.8% QoQ), which beat both our and consensus estimates. YTD, Group net profit constituted about 31.6% and 29.3% of our and consensus full year estimates attributed to an increasingly diversified product mix with higher contributions from industrial products, higher sales and increased on-site development activities across key townships. Elsewhere, SDPR continued its robust sales momentum into 1QFY24, achieving RM955.9m in sales while unbilled sales stood at RM3.6bn, securing stable earnings visibility for the next three years. As of 28 April 2024, its bookings amounted to RM2.4bn, with completed inventories registering at RM466.3m in GDV. All told, we adjust our FY24-26 upwards by +11% to 13% on changes in billing assumptions. As for valuations, we believe that the stock is now fairly-valued, and hence downgrade our call to Neutral, though we increase our TP from RM0.90 to RM1.00, after narrowing our discount to book to c.30% (from c.40% previously) given that sector valuations have also narrowed to about 0.4x book value currently.

• 1QFY24 property revenue rose 45.4% YoY to RM925.6m, driven by an increasingly diversified product mix with higher contributions from industrial products, higher sales and increased on-site development activities across key townships, including Bandar Bukit Raja, Serenia City, Ara Damansara, Putra Heights, SJ7 and Elmina Business Park, coupled with contribution from land monetisation in Kedah. Correspondingly, property pre-tax profit rose 84.3% to RM170.3m. The Group launched products worth RM820.2m in gross development value (GDV). Industrial lots and 2-storey detached factories worth RM588.7m in GDV were launched in Bandar Bukit Raja 3 Industrial Park, with a take-up rate of 60.6% as of 28 April 2024.

• Good sales momentum. The Group continued its robust sales momentum into 1QFY24, achieving RM955.9m in sales while unbilled sales stood at RM3.6bn. To recap, the Group announced an RM3.0bn sales target and plans launch pipeline worth RM3.9bn in GDV for FY24, with about 30% product mix across residential landed, high-rise and industrials. The key projects, among others, include industrial products (Bandar Bukit Raja, Elimina Business Park, Serenia City, Bandar University Pagoh and Nilai Impian), residential landed (City of Elmina, Bandar Bukit Raja, Serenia City, Nilai Impian and Bandar Ainsdale) and residential high-rise (KL East, KLGCC Resort, Elmina West and Putra Heights). The Group is poised for further growth with the launch of two landmark projects, the highly anticipated signature residences, The Ophera at KLGCC Resort, and the Elmina Lakeside Mall.

Source: PublicInvest Research - 23 May 2024