• Maintain BUY, with new MYR1.42 TP from MYR1.05, 33% upside and c.3% yield. Sime Darby Property’s 1Q24 earnings beat expectations. Strong property sales and progress billings were key drivers for property development revenue growth. Based on its strong sales momentum (1Q24 property sales: MYR956m), we think the company will likely surpass its MYR3bn sales target again by year-end, while current bookings have already hit MYR2.4bn. We like its strategic exposure to the industrial segment, and strong earnings should continue to drive the re-rating of the stock.

• 1Q24 results. The YoY growth in revenue was mainly driven by higher sales and billings from Bandar Bukit Raja, Serenia City, Ara Damansara, Putra Heights, SJ7, and Elmina. Despite a marginal QoQ drop in property development revenue, EBIT grew 32%, possibly due to higher contribution from the industrial segment and some land monetisation in Kedah. Unsold completed inventory rose to MYR312.6m, from MYR243.4m in the previous quarter. Net gearing is relatively unchanged at 0.24x vs 0.23x in 4Q23.

• Dragon Deals Campaign drove strong property sales in 1Q24. 1Q24 new property sales achieved MYR955.9m compared to MYR780m in 4Q23. The company’s industrial segment contributed 30.2% of the total sales during the quarter, followed by residential landed and residential high-rise at 26.7% and 24.5%. Key contributors include Hype Residences in Subang Jaya, TRiARA Residences in Ara Damansara, as well as Serasi Residences 1 & 2 in Putra Heights.

• Expect property sales momentum to sustain. We believe the strong property sales momentum will continue in the coming quarters. The recently launched Bandar Bukit Raja 3 Industrial Park (GDV: MYR589m) as well as The Corak shop offices in Serenia City (GDC: MYR150m) saw a take-up rate of 60.6% and 86.4%, and the response for high-end residences The Ophera at KLGCC Resort is also very encouraging. We think SDPR will likely surpass its conservative MYR3bn sales target again by the end of the year. As at end-Apr 2024, the company has total bookings worth MYR2.4bn to be converted to contractual sales.

• Forecasts. In view of the strong 1Q24 earnings, we raise our FY24-25 forecasts by 13-15%. Unbilled sales stayed at MYR3.6bn, unchanged from the previous quarter.

• Higher TP. Our new TP (with a 4% ESG premium) is based on a lower 40% discount to RNAV (from 55%).

Source: RHB Research - 23 May 2024