• FY23 core net profit grew 33% yoy to RM439m, underpinned by a 25% increase in revenue and higher margins. Achieved RM3.3bn property sales.

• Targets property sales of RM3.0bn in FY24F, with estimated RM3.8bn planned GDV, underpinned by landed & high-rise residential and industrial products.

• Reiterate Add with higher TP of RM0.93/share, based on 0.6x FY25F P/BV. SDPR is one of our top picks in the property sector.

Achieved highest core net profit since demerger in 2017

In 4QFY23, Sime Darby Property (SDPR) reported core net profit (excluding forex, impairment and fair value adjustment) of RM163m (-2% yoy; +9% yoy) taking FY23 core net profit to RM439m (+33% yoy), highest profit recorded since its demerger in 2017. This came in ahead of our and Bloomberg consensus’ expectations at 120% and 125% of FY23F estimates, respectively, on better-than-expected gross margins of 29% (vs. our estimate of 27%) and higher revenue (+25% yoy) on strong progress billing, as shortage of labour supply eases. Declared higher final dividend of 1.5sen, taking full year dividend to 2.5 sen (FY22: 2.0 sen).

Achieved RM3.3bn of property sales; targets RM3.0bn sales in FY24

Key highlights from the briefing for FY23 are: SDPR achieved new property sales of RM3.3bn, ahead of its full-year sales target of RM2.7bn, driven by landed residential and industrial products. This is on the back of RM4.0bn of gross development value (GDV) launches (fig 2). Sustained a record high unbilled sales of RM3.6bn as at-end 23 (translates to 1.4x cover ratio). For FY24F, management guided for RM3bn new property sales, underpinned by RM3.8bn of planned launches, with balanced mix of between residential landed, residential high-rise and industrial products. Through its recent 50:50 JV with Lagenda Property, it will also be offering affordable home products in Gurun, Kedah. We believe the RM3bn sales target is achievable given the group’s positive track record, mixed products, prime locations and premium branding.

Reiterate Add with higher TP of RM0.93

We raise our FY24F/25F core net profit estimates by 22%/20% to reflect higher EBITDA margins, higher interest income and higher progress billings in FY24F and FY25F, on strong unbilled sales. We also introduce FY26F estimates. Reiterate Add on SDPR on strong demand momentum for its products, premium branding, large landbank in Klang Valley, and strong balance sheet position (0.23x as at end-Dec 23). Target price slightly raised to RM0.93/share, as we roll over valuation to 0.6x FY25F P/BV, (+1.0 s.d. above its 5-year historical mean to reflect its premium branding and large landbank in Klang Valley). Re-rating catalysts include timely project completions and continued strong sales momentum. Downside risks include delays in planned launches and larger-than-expected share of losses from its Battersea Power Station joint venture, which could drag overall net earnings.

Source: CGS-CIMB Research - 27 Feb 2024