The recent 1H financial earning report saw Sime Darby Property delivering a solid revenue, the results met expectations of investment house Kenanga but disappointed the market. Its 1HFY23 net profit grew 17% YoY driven by sales of industrial and residential products, partially offset by losses from 40%-owned Battersea Power Station. The house maintains forecasts but raises TP by 20% to RM0.66 (from RM0.55) maintaining a MARKET PERFORM call on the stock. The 1HFY23 core net profit of RM131.7m came in within expectations at 47% of full-year forecast but only 43% of the full-year consensus estimate.
YoY, its 1HFY23 revenue surged 25%, primarily driven by higher property development contributions from their stronger sales and combination of industrial and residential products. Notably, gross margins fell to 27.1% materials costs likely caused some pressure. Meanwhile, the group’s 40%-owned Battersea Power Station continued to fall into deep losses (-520%) no thanks to aggressive interest rate hikes in the UK as well as the softening of property demand there. Overall, stripping out RM53m disposal gain registered in 1HFY22, SIMEPROP’s 1HFY23 core net profit of RM131.7m would
translate to a 27% growth. Briefing highlights. SIMEPROP revised its GDV to RM4.0b (from RM3.0b) in anticipation of better traction on the local front.
As of 1HFY23, the group registered their unbilled sales at RM3.8b, and 34% of the unbilled sales will be recognized in FY23. The remaining 66% is expected to be recognized in the next three financial years. Going forward, SIMEPROP looks to add more industrial products into its mix which is made up mostly of residential projects, landed or high-rise. This could benefit the group by pivoting into a direct beneficiary of economic activity and minimize exposure to potential oversupply in housing markets.
The group had announced its venture into rooftop solutions for solar energy production to diversify its revenue streams by 2025 while aligning with the Government’s vision to achieve 70% renewable energy capacity by 2050. SIMEPROP is collaborating with the government on a rooftop solar project for the upcoming City of Elmina and intends to explore potentials with 1,000 residential units in 2HFY23 and might expand to 10,000 homes in the next five years.
Battersea will likely be in the red, no thanks to higher overall business expenses fuelled by the severely tightened monetary
policies there. That said, the group believes that cost pressures may ease over time, particularly with more commercial leases being signed there and new apartment launches demonstrating encouraging take-ups.
