Sime Darby Property takes cautious stance


“There is no crystal ball but I believe the sales momentum will still be strong albeit not as high as FY22," says group MD Azmir Merican.

PETALING JAYA: Sime Darby Property Bhd (SimeProp) cautioned of weaker sales momentum going into financial year 2023 (FY23) due to headwinds like labour issues, uncertainties in the interest rate environment and overall market sentiment.

“There is no crystal ball but I believe the sales momentum will still be strong albeit not as high as FY22.

“Going into the new year, we do have a sales target. The number still needs to be approved internally so I cannot disclose it but it will be lower than what we have achieved this year,” said group managing director Datuk Azmir Merican during a financial results briefing yesterday.

Azmir said labour shortage will remain the main challenge for the property developer in the quarters ahead.

“We know that there are workers coming in but it will take time for the whole value chain to settle down before ramping up again,” he said.

Labour shortages also make up the group’s rationale to revise its property launches in the fourth quarter of 2022 (4Q22).

While SimeProp has launched RM2.1bil worth of products this year and enjoyed an average take-up rate of 90%, the group has lowered its launches for 4Q22 to a total gross development value of RM500mil.

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“We feel it is better to delay launches by at least a quarter to allow for more workers to come in and for the tender value to have a better pricing.

“While we note there are workers coming in, the situation will still take a bit more time. Hopefully, things will be better for us when we launch our offerings again in three months,” said Azmir.

He added that the higher interest-rate environment worldwide may affect the prices of goods that the group imports.

“One good thing is that the elections are over. Our economy should be more positive going forward and on this note, investor sentiments are also very important. If we get those things right, we can better manage the headwinds in 2023,” said Azmir.

For 3Q22, SimeProp’s revenue jumped 78% year-on-year (y-o-y) to RM689mil, underpinned by better sales in the property development segment.

Net profit for the period amounted to RM56mil, in contrast to a net loss of RM5.2mil it incurred in 3Q21.

The group has exceeded its sales target of RM2.6bil for FY22 by achieving RM2.7bil in sales for the first nine months of FY22 (9M22). The actual sales figure is a 43% y-o-y increase from the RM1.9bil sales in the corresponding period in FY21.

“While 3Q22 results were not as strong as 2Q22, on a whole, we are still quite happy with our performance in this quarter.

“Our property development segment improved by garnering stronger sales from new launches in major townships like City of Elmina, Bandar Bukit Raja, Elmina Business Park, Serenia City, and Nilai Impian.

“These projects contributed to increased activity not only for the quarter but also for the year,” said Azmir.

He added that the property development division has surpassed pre-pandemic levels, posting a 19% and 72% increase y-o-y in terms of revenue and pre-tax profit, respectively, for 9M22.

“This segment remains the largest revenue contributor to the group with a 92% stake. Pre-tax profit margins have improved significantly at RM270mil currently, which is a 16.5% rise compared with 11.4% in 9M21,” said Azmir.

For its investment and asset management segment, the group recorded a revenue of RM80mil, with a pre-tax profit of RM42mil for 9M22.

Meanwhile, the group’s leisure arm registered a 66.4% growth y-o-y in revenue for 9M22 while pre-tax profit was up by more than 100% y-o-y for the period.

“Both divisions are benefiting from a rise in footfall following the ease of lockdowns. The KL East Mall and Melawati Mall have higher footfall and occupancy rate, which has supported margins.

“Our golf clubs also reported a similar outlook,” said Azmir.

SimeProp’s unbilled sales stood at RM3.5bil or a cover ratio of 1.7 times as at Sept 30, 2022, on the back of stronger sales momentum in the quarter. This will provide future earnings visibility for the group for the next two years.

“Our present unbilled sales cover ratio of 1.7 times is a significant improvement from our cover ratio of 0.8 times against an unbilled sales of RM2bil in 2018,” said Azmir.

With a net gearing ratio of 28.2% and a healthy operating cashflow of RM681mil in 9M22, the group plans to preserve margins through strict cost-optimisation measures.

“When we launch projects, we make sure the launch is viable. If margins for a development fall below expectations, we would either call it off or redesign it. It is also important to work together with the right partners and contractors we know can deliver the job at the best price.

“Being a good paymaster helps as the contractors know that they will be paid. In terms of launches, we will always monitor how the market reacts.

“We are also keeping an eye on factors in the external environment. While we have a plan to reach our target, the plan is dynamic. When things change, we will also try to react accordingly,” said Azmir.

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