AmInvest maintains hold call on Sime Darby Property

AMINVESTMENT Bank Research has maintained its hold call on Sime Darby Property Bhd with a lower fair value (FV) of 86 sen (from 90 sen) based on a 50% discount to its revised net asset value (RNAV) of RM4.78 bil.

“We cut our FY20-21 numbers by 2% and 10% respectively to reflect the timing of recognition while introducing FY22 net earnings forecast at RM384.4 mil,” said the research house in a note on Feb 27. 

Sime Darby Property registered a FY19 net profit of RM598.5 mil (+287.8% yoy). This is mainly boosted by a higher contribution from the property development segment and one-off gains. 

“Excluding these exceptional items, the company’s FY19 core net profit of RM352.1 mil (+502% yoy) came in within our expectation but below consensus,” said AmInvest.

The property development segment’s earnings before interest and taxes (EBIT) improved significantly by 597.6% yoy to RM416.9 mil mainly on higher contributions from Denai Alam, Bukit Jelutong, Nilai Utama, Bandar Bukit Raja, Serenia City and Putra Heights township, KLGCC Resort and Cantara Residences.

The company has secured new sales of RM3.1 bil mainly from ongoing projects and completed inventories. As of Dec 31, 2019, total unbilled sales stood at RM1.6 bil.

The property investment segment registered a lower profit of RM5.0 mil from RM54.4 mil  previously due to the absence of income from concession arrangement.

The company’s share of losses from joint ventures and associates increased to RM31.4 mil (17.2%) mainly attributable to the higher marketing expenses incurred by Battersea Power Station in London and a lower share of profit from PJ Midtown.

Moving forward, the company anticipates that the market will remain soft in 2020 due to the prevailing overhang situation and expiry of the Home Ownership Campaign at the end of last year.

Sime Darby Property will continue to monetise low-yielding assets to unlock value and channel the capital into business opportunities with better returns.

“We believe the outlook for Sime Darby Property remains stable, premised on inventory-clearing activities and overseas contribution in 4QFY20 and a healthy balance sheet,” said the research house. 

The counter opened 1.97% higher at 77.5 sen. – Feb 27, 2020

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