SDPR recorded FY21’s core earnings of RM139.4m (+7.5% YoY) which beat our expectation from better progressive billings and higher sales achieved prior to end of HOC. RM3bn sales was achieved in FY21, surpassing its own sales target of RM2.4bn. SDPR also managed to register record high launches of RM3.7bn worth of products in FY21 with average take up rate of 87%. Moving into FY22, management is setting a conservative sales target of RM2.6bn (-13% YoY) likely due to the ending of HOC. This is supported by RM2.8bn GDV launches target of FY22. We believe SDPR is well-positioned to capture the demand once the market rebounds as the planned developments are situated within key growth areas and economic corridors. Maintain our forecast and BUY recommendation with unchanged TP of RM0.78 based on a 60% discount to our estimated RNAV of RM1.95.

Above expectations. 4Q21 core earnings of RM75.6m (3Q21 losses of -RM15.6m; +7.9% YoY) brought FY21’s sum to RM139.4m (+7.5% YoY). The results were above our (112%) but matched consensus expectation (103%) from better progressive billings contribution and higher sales achieved prior to end of HOC.

QoQ. Revenue showed a substantial improvement by 90.4% driven by recovery in all business segment especially property development which almost doubled in the current quarter. Investment & asset management segment also saw a 41.2% increase from the recovery in retail activities upon easing of lockdown which led to higher contribution by KL East Mall, coupled with share of profit from Melawati Mall (profit of +RM1.3m vs losses -RM3.7m). The leisure segment also benefited from the easing of lockdowns and registered a growth of 61.5%. Subsequently, SDPR chalked in a profit of +RM75.6m in 4Q21 vs loss of -RM15.6m in 3Q21.

YoY. Overall total revenue improved by 4.8% attributable to higher property development (+3.7%), Investment & asset management (+42.3%) as well as leisure segment (+5.2%), which in turn increased core earnings by 7.9%.

YTD. Despite lower leisure segment by -22.5% (as contribution from events and functions remained low during the pandemic), total revenue rose by 7.6% thanks to (i) higher property development by 7.7% driven by higher sales and progressive billings and (ii) higher investment & asset management segment by 37.2% with the first full year of operating revenue from KL East Mall. Overall core earnings showed an improvement by 7.5% despite the higher COGS by 14.1%, attributable to lower share of losses from JV and associates owing to higher contribution from PJ Midtown and lower operating expenses incurred by Battersea.

Sales and launches. RM1.024bn worth of sales was achieved in 4Q21, bringing FY21 sales to RM3.0bn, exceeding its sales target of RM2.4bn. Unbilled sales increased to RM2.4bn as of 4Q21 (+14% QoQ), representing a cover ratio of 1.2x. The group also managed to register record high launches of RM3.7bn worth of products in FY21 with average take up rate of 87%.

Outlook. Moving into FY22, we note that management is setting a conservative sales target of RM2.6bn (-13% YoY) likely due to the ending of HOC. This is supported by RM2.8bn GDV launches for FY22 with strategic product mix (c.81% residential, c.16% industrial). We believe SDPR is well-positioned to capture the demand once the market rebounds as the planned developm ents are situated within key growth areas and economic corridors from central Klang Valley to Negeri Sembilan and Johor while being strategically connected to major highways.

Forecast. No changes to our forecast despite the positive results surprise as we prefer to err on the side of conservatism. 

Maintain BUY recommendation with unchanged TP of RM0.78 based on a 60% discount to our estimated RNAV of RM1.95. We like SDPR for its exposure towards township developments which are well connected, access to a huge land bank, land monetisation strategy to hasten the land bank turnover, and a healthy balance sheet at 0.32x net gearing.

Source: Hong Leong Investment Bank Research - 25 Feb 2022