SIMEPROP: Here comes a breakout

Our top BUY in the property sector. SIMPROP is currently our house top pick for the property sector with a target price of RM1.05, indicating a commendable upside of 39% from current level. SIMEPROP is poised to shine given its strategic presence in (i) industrial and (ii) landed residential segments in the Greater Klang Valley area (i.e. KL, Selangor and fringe areas of Negeri Sembilan neighbouring Selangor). The group's notable qualities as pure-play developers, possessing the largest landbank and strong execution provides a head start in the upcycle ahead of its peers given its exposure to the attractive segments. With the last hurdle of labour shortage resolved, we think the group is ready to double down on its effort and go into market more aggressively moving forward, which should culminate in stronger earnings growth in years to come.

Proxy to Malaysia’s strong FDI. To recap, SIMEPROP’s industrial sales contribution recorded a strong upward trajectory from 2019’s 0% to 33% of its 9M23 sales. As the largest industrial developer in Malaysia, boasting over RM15bn in GDV for industrial projects, SIMEPROP is well-positioned amid the strong FDI to Malaysia, which benefitted from the escalating geopolitical tensions and the prevailing de-globalization trend. Given Malaysia's attractiveness as an investment destination, the anticipated surge in FDI is poised to boost the demand for SIMEPROP's industrial properties, especially considering the strategic connectivity of SIMEPROP's industrial lands to the upcoming ECRL line. Notably, the industrial segment offers higher margins and faster construction time compared to residential properties.

52-week high on the making. SIMEPROPR is currently pending for a U-shaped pattern breakout, with indicators showing uptick bias. A successful breakout above RM0.76 neckline will spur the price toward RM0.81-0.90-0.94 region. Cut lost at RM0.66.

Collection range: RM0.69-0.72-0.75

Upside targets: RM0.81-0.90-0.94

Cut loss: RM0.66

Source: Hong Leong Investment Bank Research - 29 Jan 2024