SDPR reported 4Q22 core PATAMI of RM167.5m bringing FY22’s sum to RM339.5m (+1.4x YoY). The result was well above our and consensus expectations. The positive deviation was due to (i) stronger-than-expected sales and progress billing; as well as (ii) better-than-expected contribution from its JV. We increase our FY23/FY24 forecasts by +14%/2% to account for better site progress assumption. Maintain BUY call with an unchanged TP of RM0.78 based on a 60% discount to our estimated RNAV of RM1.95. With supply side pressure including labour shortage as well as raw material and labour costs easing, we believe the group is ready to scale up growth by activating its vast landbank. In addition, the stock with its exposure in the industrial segment also provides a good proxy to the strong FDI growth trend in Malaysia.

Well above expectations. SDPR reported 4Q22 core PATAMI of RM167.5m (+1.5x QoQ; +1.7x YoY bringing FY22’s sum to RM339.5m (+1.4x YoY). The result was well above our (144.3%) and consensus (139.9%) expectations. The positive deviation was due to (i) stronger-than-expected sales and progress billing; as well as (ii) better than-expected contribution from its JV. FY22 core PATAMI was arrived at after excluding net EIs of -RM23.7m from (i) FV change of investment properties (- RM51.6m); (ii) PPE disposal gain (+RM53m); (iii) loss on lease modification (- RM12.8m); (iv) inventories write-down (-RM6.3m), (v) PPE write-off (-RM3.1m); and (vi) receivables impairment (-RM2.8m).

Dividend. 1 sen, ex-date: 14 Mar 2023 (4Q21: none). FY22: 2 sen (FY21: 1 sen).

QoQ. Revenue increased by +38.8% due to (i) higher property sales (+18%); and (ii) better site progress towards end of the year. Core PATAMI increased by +1.7x to RM167.5m due to (i) top line improvement; and (ii) better share of profit from its JV of RM8.5m (from -RM28.2m in 3Q22) due to FV gain in investment properties in Battersea (sum not disclosed).

YoY. Revenue increased +29.6% YoY due to better site progress towards end of the year. Core PATAMI increased by +1.7x due to same reasons as QoQ paragraph above.

FY22. Revenue increased by +23.7% due to (i) higher property sales (+25.4%) and (ii) better site progress towards end of the year. Core PATAMI increased by +1.4x due to (i) top line improvement; and (ii) improvement in property development EBIT margin to 18.7% (from 13.9% SPLY) likely due to higher industrial product sales.

Sales and launches. SDPR recorded 4Q22 sales of RM953.8m (+18% QoQ; -6.9% YoY), bringing FY22’s sum to RM3.7bn (+25.4% YoY), exceeding its full year sales target of RM2.6bn (142.3%). The group launched RM500m worth of products in 4Q22, bringing FY22’s sum to RM2.6bn (-30.1% YoY), representing 92.8% of its full year target of RM2.8bn. Unbilled sales as at 4Q22 stood at RM3.6bn (+2.9% QoQ), representing a 1.41x cover of its FY22 property development revenue.

Outlook. The group continues to record strong sales momentum with its FY22 sales far exceeding its full year sales target, signalling positively that its product launches continue to meet market demand. We also see better revenue and earnings recognition this quarter from acceleration in site progress especially towards year -end as labour shortage situation improves. We expect the group’s residential products should continue to do well capitalizing on its strong branding. Similarly, following the strong FDI trend, its industrial segment should also continue to do well and is poised to benefit from this. The main downside risk for the group comes from its Battersea project as we anticipate challenging landscape ahead given rising mortgage rates and stubbornly high inflation in the UK.

Forecast. We increase our FY23/FY24 forecasts by +14%/2% to account for better site progress assumption.

Maintain BUY with unchanged TP of RM0.78 based on a 60% discount to our estimated RNAV of RM1.95. With supply side pressure including labour shortage as well as raw material and labour costs easing, we believe the group is ready to scale up growth by activating its vast landbank. In addition, the stock with its exposure in the industrial segment also provides a good proxy to the strong FDI growth trend in Malaysia.

Source: Hong Leong Investment Bank Research - 1 Mar 2023