• Maintain BUY, with new MYR2.20 TP from MYR2.00, 50% upside and c.2% yield. After our site visit last Thursday to the Elmina township and Elmina Business Park (EBP), we come away bullish on the development and believe it will continue driving Sime Darby Property’s property sales and earnings over the next 10-15 years. Since Google’s data centre (DC) investment announcement, SDPR has seen significant demand in EBP. Given the faster landbank turnaround and value maximisation effort on its industrial land, we narrow our discount to RNAV to 20% (from 25%).

• Strong growth prospects for Elmina township. The Elmina development encompasses 6,500 acres of freehold land with MYR30bn GDV. It currently has 12,535 completed residential units and a population size of 67,000. The township city centre, which comprises an education hub, wellness hub, office cluster and retail components, is well-planned and now gradually taking shape, especially after the opening of Elmina Lakeside Mall (ELM) in August this year. The first school in the township SJK(C) Regent Elmina will open in 2026, while construction for Chung Hwa Independent High School will start by end 2024. The future transit hub may also have a Mass Rapid Transit (MRT) station (Line 3) there. Hence, with all the important infrastructure, commercial elements and amenities available, we think Elmina will be a well- developed township in 5-10 years.

• Expect Kanopi Residences to be sold out. Kanopi Residences (estimated at GDV MYR250m), which will be launched next month, is the first high-rise project in the Elmina township. Pricing at around MYR530psf (before discount) with 1,000 sqf built-up (3 bedrooms and two carparks), we think the project is within the affordable range, and will be well received as ELM, schools, a future medical centre and transportation hub are all within the vicinity.

• Further upside in Elmina’s GDV is highly likely. The Elmina township and EBP are now a significant property sales contributor and the number has grown over the past three years (FY22: MYR788.7m, FY23: MYR993m; 1HFY24: MYR501.6m), accounting for 25-30% of annual property sales.

• Google DC construction site is busy. Google DC is on track to be completed in 3Q26. SDPR indicated that the land at EBP available for built-to-suit purposes has only 38 acres remaining in EBP 1, and hence, insufficient to meet the significant demand in the pipeline. Many ancillary industries along the DC supply chain (eg cooling tower manufacturing) are keen to set up a production plant in EBP. As such, SDPR will have to be discerning in its selection. However, the company is also in the process to activate the infrastructure and ground works for EBP 2, which could possibly house more factories and DCs in the future.

Source: RHB Research - 28 Oct 2024