KUALA LUMPUR: CGS-CIMB Equities Research retained its Add call for Sime Darby Property (SD Property) given the solid balance sheet and stronger sales momentum. Target price was maintained at RM1.32.
It said on Thursday SD Property’s 9MFY19 core net profit (excluding RM209m disposal gain of Darby Park Singapore, RM108m land disposal gain and RM128m impairment/provision) came in above its expectations at 102% of its full-year estimate, but below Bloomberg consensus numbers at 60%.
“The outperformance was due to higher-than-expected revenue recognised from its ongoing projects and lower tax rate.
“Its 9M19 core net profit rose to RM307m vs. RM69m in 9M18, supported by a strong 38% yoy sales growth from development activities in Denai Alam, City of Elmina, Bandar Bukit raja, Nilai Utama, Serenia City and Cantara Residences, ” it said.
CGS-CIMB Research said 9M19 new property sales came in at c.RM2bn (excluding RM269.3m from land sales) due to its aggressive Primetime 8 and Pop Raya marketing campaigns, representing 87% of its FY19 sales target of RM2.3bn.
It added RM280.9m of new sales came from inventory monetisation, RM968.8m from ongoing projects and RM732.5m from new launches.
“We believe SD Property could potentially exceed its FY19 sales target given the strong sales momentum.
“SD Property is also on track to expand into the growing industrial and logistics development segment, ” it said.
CGS-CIMB Research said this includes build-to-suit, lease assets and managed industrial parks in City of Elmina and Bandar Bukit Raja. Rolling out RM830m GDV of projects in 4Q19 SD Property plans to roll out projects with gross development value (GDV) of RM2bn2.5bn in FY19 (vs. RM2.7bn GDV in 12MFY18).
As of Sep 2019, the group has launched projects worth up to RM1.4bn GDV with an encouraging take-up rate of 77%.
“For 4Q19, the group plans to launch another RM830m GDV of new projects. Unbilled sales as at end-Sep 2019 stood at RM1.6bn vs. RM2.3bn as at end-Sep 2018.
“We revise up our FY19-21F EPS by 1-11% to reflect the changes in project revenue recognition and a lower tax rate.
“Our TP is maintained at RM1.32, still based on a 65% discount to RNAV. Maintain Add given the solid balance sheet and stronger sales momentum.
“Potential re-rating catalysts are a ramp-up in launches and new property sales. Key risks to our call include a further deterioration in sentiment in the property market and lower-than-expected new property sales, ” the research house said.
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