SDPR recorded 1H22 core net profit of RM106.4m (+9.5% YoY), which was within expectations. The group show s a steady improvement sequentially driven by an improvement in all segments. Maintain forecasts and our BUY call with unchanged TP of RM0.78 based on a 60% discount to our estimated RNAV of RM1.95. We like SDPR as we see the group is scaling up its growth evidenced by its sales growth and its healthy launch pipelines YTD.

Within expectations. SDPR recorded 2Q22 core PATAMI of RM60.2m (+29.4% QoQ; +1.2x YoY), bringing 1H22’s sum to RM106.4m (+9.5% YoY). The results was within our (45.2%) and consensus (47.4%) full year forecasts. 1H22 core PATAMI was derived after excluding net EIs of RM44.8m mainly from gain on disposal of subsidiaries of RM44m.

Dividend. 1 sen, ex-date: 29 Sept (2Q21: 1 sen). 1H22: 1 sen (1H21: 1 sen).

QoQ. Revenue increased by +28.2% lifted by all segments – property development (+30.1%), property investment (+7.2%) and leisure (+12.9%). The increase in property development was due to higher sales and development activities in City of Elmina, KLGCC Resort, Hamilton Nilai City, Serenia City, Elmina Business Park and Subang Jaya City Centre townships. Core PATAMI increased by +29.4% due to top line improvement but partially moderated by higher operating cost from its property investment segment.

YoY. Revenue increased by +22.6% lifted by all segments – property development (+21.1%), property investment (+17.5%) and leisure (+71.9%). Core PATAMI increased by a larger magnitude of +1.2x mainly due to better sales in higher margin products in property development segment.

YTD. Revenue was flat at 0.5% as improvement in property investment (+16.9%) and leisure (+53.9%) was partially offset by property development (-1.8%). Property investment and leisure improved on the back of economic reopening, while property development was slightly lower due to lower sales of completed inventories and lower development activities in City of Elmina and KLGCC Resort. Despite flattish revenue, core PATAMI increased by +9.5% due to lower tax rate of 29.6% (vs. 37.4% SPLY).

Sales and launches. SDPR recorded 2Q22 sales of RM1.05bn (+18% QoQ; +30.7% YoY), bringing 1H22’s sum to RM1.94bn (+53% YoY), representing 74.5% of its full year sales target of RM2.6bn. The group launched RM1.11bn worth of products in 2Q22, bringing 1H22’s sum to RM1.49bn, representing 53.2% of its full year target of RM2.8bn. Unbilled sales as at 2Q22 increased to RM3.35bn (+15.5% QoQ from RM2.9bn in 1Q22), representing a cover ratio of 1.62x of its FY21 property development revenue.

Outlook. The group shows a steady improvement sequentially driven by an improvement in all segments. Despite the end of HOC, the group continues to record robust sales and achieve strong take-up rate for its new launches, signalling positively that its product launches continue to meet the market demand. The group’s improving property investment and leisure segments should help to mitigate the labour shortage condition which impacts the revenue and profit recognition from its property development segment.

Forecast. Unchanged.

Maintain BUY with unchanged TP of RM0.78 based on a 60% discount to our estimated RNAV of RM1.95. We like SDPR as we see the group is scaling up its growth evidenced by its sales growth and its healthy launch pipelines YTD. With its vast landbank strategically located within key growth areas and economic corridors from central Klang Valley to Negeri Sembilan and Johor, the group should be able to strategically plan its launch pipelines to cater to the current market demand.

Source: Hong Leong Investment Bank Research - 26 Aug 2022