KUALA LUMPUR (May 23): Amid challenges posed by rising construction material costs and potential fuel subsidy rationalisation, Sime Darby Property Bhd (KL:SIMEPROP) said it is confident of continuing to defend its profit margin via a strategic product mix.

Its group managing director Datuk Azmir Merican Azmi Merican said the group’s financial result for the first quarter ended March 31, 2024 (1QFY2024) serves as a strong testament to the effectiveness of having a good product mix as a tool to fortify margins.

“The reasons we have done well for the first quarter, number one is for us to have the right product mix. The right product mix allowed us to defend margins,” said Azmir at a briefing on the 1QFY2024 results on Thursday.

He envisioned that industrial properties alongside landed and high-rise buildings would make up one-third of the group’s offerings in the full year.

This diversification is a strategy to ensure healthy profit margins in the face of rising construction costs. Sime Darby Property's profit margin came in higher at 12.63% in 1QFY2024, from 8.85% a year ago.

Azmir said the developer is waiting for more details on the fuel subsidy rationalisation to assess how big of an impact it will have on the property sector.

“Our subcontractors do not benefit from the fuel subsidy, as they do not buy at the pumps. When there is rationalisation at the pumps, that will not impact our subcontractors. Nonetheless, we are waiting for more details and we have to wait and see what is being planned," he said.

Putrajaya's plan to implement targeted subsidies will begin with diesel and involve only consumers in Peninsular Malaysia, said Prime Minister Datuk Seri Anwar Ibrahim on Tuesday. Anwar said pulling the diesel subsidies will save the government RM4 billion a year. However, no implementation timeline was disclosed.

Additionally, he cited that good site progress also contributed to its 1QFY2024 results.

Sime Darby Property's net profit for 1QFY2024 doubled to RM123.58 million from RM60.67 million a year earlier, as revenue rose 42.81% to RM978.69 million from RM685.33 million.

On track to achieve RM3 bil sales target for FY2024

The developer said it is on track to achieve its sales target of RM3 billion for FY2024. It has so far achieved about RM955.9 million or 32% of the sales target,

For FY2024, the group plans to launch new projects with a gross development value of RM3.9 billion. Of this, RM820.2 million worth of projects was launched in 1QFY2024 with another RM1.2 billion to be launched in 2QFY2024.

As of end-March, Sime Darby Property’s unbilled sales stood at RM3.6 billion, on the back of the growing contribution from both its residential high-rise and industrial products, providing the group an earnings visibility over the next three years.

Asked on its expansion plan outside of Greater Klang Valley areas, Azmir said it is considering opportunities in Johor and will conduct a study of potential development there.

Sime Darby Property shares settled nine sen or 8.41% higher at RM1.16 on Thursday, valuing the group at RM7.89 billion. Year to date, the stock has gained 86%.