KUALA LUMPUR: CIMB Equities Research is maintaining its add recommendation for Sime Darby Property with a target price of RM1.85, which is 32% above the last traded price of RM1.40.
It said on Wednesday it valued the stock based on a 50% discount to its estimate of its realised net asset value (RNAV), translating into a target price of RM1.85.
“The large discount vs. an average of 35% we attach to the other property stocks under our coverage is to reflect the slower monetisation and longer gestation period of its considerable landbank.
“Our valuation does not include the potential value enhancement from the additional landbank of 20,602 acres under the Malaysia Vision Valley (MVV) option agreements and land option agreement,” it said.
CIMB Research recently hosted Sime Darby Property (SD Property)’s management in a non-deal roadshow in London, UK, during which they met 10 fund managers and buy-side analysts over the two-day event.
Investors were generally positive on the group’s outlook, given its strategic landbank and ongoing transformation post demerger. Investors were interested in the group’s UK Battersea Power Station (BPS) joint venture project, its transformation progress and growth strategies post demerger.
Currently, SD Property is still Malaysia’s largest property developer in terms of landbank size of 20,743 acres, with remaining gross development value (GDV) of RM96bil.
These exclude the additional 20,599 acres of land under option agreements with Sime Darby Plantation and Sime Darby Bhd.
Most of the group’s landbank are strategically located with good connectivity - either with easy access to expressways or public transportation
“SD Property has been disposing of non-strategic lands outside of its key developments to enhance land value and expedite development via other developers.
“The group has identified land for disposal (e.g. Kedah) and will be rewarding shareholders through dividends.
“Given its near-net-cash balance sheet and potentially higher profit from land disposals, we do not rule out the possibility of a higher dividend payout in the future vs. its current dividend policy of a 20% payout,” it said.
CIMB Research said SD Property also organised a site visit to its 40%-owned Battersea Power Station (BPS) site tour to provide the investors greater insight into the BPS project.
BPS spans across 42 acres of land, with an estimated total GDV of £9bil that will be launched over seven phases.
The overall BPS project looks attractive, as the land acquisition cost of £400mil translates to only c.4% of the total estimated GDV (vs. 10%-20% for normal projects).
Phase 1 has been completed, and phase 2 will be ready by end-CY20.
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