• Maintain Buy with a higher target price (TP of RM1.21). Simeprop's 1QFY24 revenue surged to RM978.7mn, marking a 42.8% YoY increase. This growth was driven by higher sales volume of a diversified product mix, with significant contributions from industrial products. Net profit surged by 118% YoY to RM125mn, which was 28% within our expectations. The improved performance was mainly driven by the property development and lower losses from the investment and asset management, although it was partially offset by higher losses from the leisure segment. Maintain a BUY call with a higher TP of RM1.21 (from RM0.89), pegged at 0.8x P/B to FY24F BVPS of RM1.52.

• Key highlights. Simeprop’s 1QFY24 revenue marginally fell to RM978.7mn, a 3.4% QoQ decrease, as the last quarter of the financial year is typically the strongest. Despite improved segment results compared to the preceding quarter, with higher profit from property development and lower losses from investment and asset management, core net profit decreased to RM125.1mn, a 23% QoQ decline. This decrease was driven by lower effective tax rate and higher other gains in the preceding quarter, which mainly comprised the reversal of a provision for an obligation related to a property disposal. On YoY basis, the results were also bolstered by sales of residential products, with increased on-site development activities in Bandar Bukit Raja, Serenia City, Ara Damansara, Putra Heights, SJ7, and Elmina Business Park townships, along with contributions from land monetisation in Kedah.

• Earnings Revision. No revision.

• Outlook. We anticipate Simeprop to sustain its positive earnings, driven by the robust industrial segment and improvements in the residential market. Its unbilled sales stood at RM3.6bn. It is poised for further growth, with sales targets of RM3.0bn and plans to launch new projects valued at RM3.9bn GDV in fiscal year 2024.

Source: BIMB Securities Research - 23 May 2024