Sime Darby Property (SDPR) reported another stronger than expected quarter, with Group 2QFY24 net profit more than doubling YoY to RM161.9m (+127.9% YoY, +31.1% QoQ), which beat both our and consensus estimates. In 1HFY24, Group net profit of RM246.5m constituted about 63%% and 66% of our and consensus full year estimates. The earnings surprised on the upside mainly due to higher than expected profits from its land sales. The Group launched RM2.3bn in Gross Development Value (GDV) in 1HFY24, with RM2.1bn presales achieved (+40% YoY). With the strong sales momentum, it has raised its FY24 sales target by 17%, from RM3.0bn to RM3.5bn. Unbilled sales remained steady at RM3.7bn (from RM3.6bn in1QFY24). All told, we adjust our FY24-27 upwards by +3% to +17% on higher margins imputed on land sales and changes in billings assumptions. The stock has performed better than expected on its venture into data center investment and also improved sentiment on property sector which is now trading at c.0.7x book value. We understand that its data center could potentially add c.RM100m to its earnings based on its triple-net rental arrangement upon completion in FY26. That said, we believe that positives are baked-in with the stock currently at 0.9x of its book value, or at 21x FY25 EPS. Maintain Neutral with higher target price of RM1.20, or pricing it at 0.8x (from 0.7x previously) book value, at about 18x FY25 EPS.

• 1HFY24 property revenue rose 62% YoY to RM2.1bn, primarily driven by heightened sales activity and on-site development progress from major townships such as Bandar Bukit Raja, Serenia City, City of Elmina, KLGCC Resort, and Ara Damansara township, coupled with contribution from noncore land monetization in City of Elmina and Lembah Acob, Selangor. Correspondingly, property segment’s PBT jumped by 133% YoY to RM476m. The Investment & Asset Management (IAM) segment’s revenue increased by 11% YoY to RM58.1m attributable to higher occupancy rates, which reached 96%, and positive rental reversions at KL East Mall. The profits were mitigated by share of losses from joint ventures contributing to a loss before tax (LBT) of RM29.5m.

• Raised FY24 sales target to RM3.5bn. The Group launched RM2.3bn in GDV in 1HFY24, achieving 59% of the full-year target of RM3.9bn. Overall, the average take-up rate for all products amounted to 77% as of August 2024 with RM2.1bn pre-sales achieved (+40% YoY). With the strong sales momentum, it has raised its FY2024 sales target by 17%, from RM3.0bn to RM3.5bn. Overall bookings as of 11 August 2024 stood at RM2.2bn while unbilled sales remained steady at RM3.7bn (from RM3.6bn in1QFY24). 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.

Source: PublicInvest Research - 23 Aug 2024