• Maintain BUY and MYR2.20 TP, 55% upside with c.3% FY25F yield. Sime Darby Property’s 3Q24 earnings are in line. Although the Battersea Power Station (BPS) project continued to incur losses (by a smaller quantum QoQ), key business divisions charted robust numbers. Notably, SDPR already achieved MYR3.2bn in property sales for 9M24, and this should lead it to meet (or surpass) its MYR3.5bn target by the year-end. Its balance sheet has also strengthened – net gearing dropped to 19.5% from 22.3% as at 1H24.

• 3Q24 results. The sequential drop in property development earnings was largely due to the disposal of non-core land in Elmina and Lembah Acob in Selangor, which was recognised in the previous quarter. Meanwhile, revenue for its investment and asset management division grew 30% QoQ as the occupancy rate at KL East Mall improved to 98% from 96% in 2Q24, and Elmina Lakeside Mall (at 98% occupancy) was opened in August. The group’s earnings for the quarter, however, were affected by: i) Higher depreciation charges arising from an asset review exercise for the leisure segment; and ii) MYR46.8m share of JV losses (vs MYR87.9m in 2Q24) related to the additional development and infrastructure cost incurred on a completed project in BPS.

• Strong property sales in 3Q24. 3Q24 property sales totalled MYR1.1bn, similar to the MYR1.14bn achieved in 2Q24. Of the total sales of MYR3.2bn for 9M24, the industrial segment accounted for the largest portion (32%), followed by the residential high-rise segment (30%). The residential landed and commercial segments made up the remaining 20% and 14%of total sales. About MYR2.9bn worth of projects were launched in 9M24, reaching 75% of its full-year target launch of MYR3.9bn. SDPR’s average take-up rate was at 76% as of end-October, and key residential projects included Elmina Green 7, Hype Residences at SJ7 and The Ophera at Kuala Lumpur Golf and Country Club. In our opinion, SDPR may well exceed its sales target of MYR3.5bn again by end-December, as its total bookings were already at MYR1.9bn as of 31 Oct 2024.

• Forecasts. We maintain our earnings forecasts. Unbilled sales remained unchanged at MYR3.7bn (same as the previous quarter). While the strong property sales may provide upside risks to FY24 earnings, we are cautious on the unpredictability of the BPS project – given its past history of cost overruns, impairments and provisions for yield guarantees.

• Maintain TP. Our TP (with a 4% ESG premium imputed) is based on a 20% discount to RNAV

Source: RHB Securities Research - 21 Nov 2024