9MFY21 CNP of RM68m came broadly within expectations as we anticipate a strong 4QFY21 fueled by normalized construction progress and a surge in property sales. 9MFY21 sales of RM1.9b exceeded ours/management’s RM2.4b target as 4QFY21 should come in strong backed by RM1.6b worth of launches and last minute buying before HOC ends in Dec-21. Consequently, raise FY21 sale to RM2.8b. Maintain FY21/22E earnings. Keep MP on unchanged TP of RM0.735 pegged to FY22E PBV of 0.5x.

Broadly within expectations. 3QFY21 core net loss (CNL) of RM12.5m dragged 9MFY21 CNP to RM67.8m, accounting for 42%/35% of ours/consensus full year estimates respectively. We deem this broadly within ours as we anticipate a strong 4QFY21 fueled by normalized construction progress and a surge in property sales. No dividends as expected.

Sales above target. 3QFY21 sales of RM0.62b led 9MFY21 sales to RM1.926b – above our/management’s RM2.4b target as 4QFY21 sales is expected to come in strong in view of (i) high launches set for 4QFY21 at RM1.6b (9MFY21 launched RM2.3b), and (ii) last minute buying prior to HOC ending by year end. Consequently, we raise our FY21E sales target to RM2.8b.

Results’ highlights. YoY, 9MFY21 CNP of RM68m improved 117% mainly because of the higher revenue recognized (+9%) stemming from shorter and easier lockdown measures. QoQ, 3QFY21 CNL of RM12.5m reversed into a loss mainly from reduced revenue (-23%) caused by the FMCO lockdown in July till mid-Aug which impede construction progress.

Outlook. The group’s upcoming RM1.6b worth of launches in 4QFY21 consist mostly residential projects (landed residential: 58% and high rise residential: 14%) located in prime Klang Valley areas, 26% of industrial and 1% of commercial products. Unbilled sales of RM2.1b provide c.1-year visibility.

Post results, we keep FY21/22E earnings unchanged.

Maintain MARKET PERFORM and unchanged TP of RM0.735 based on FY22E PBV of 0.53x pegged to 0.5SD below 5-year mean. Against peers, we believe SIMEPROP has better earnings visibility as it owns vast land banks (at low rates) in matured townships allowing them to focus on landed/industrial products during these challenging times and therefore be less affected by the high-rise oversupply issue.

Risks include: (i) weaker/stronger-than-expected property sales, (ii) weaker margins, (iii) changes in real estate policies, and (iv) changes in lending environment.

Source: Kenanga Research - 26 Nov 2021