Sime Darby Property group managing director Datuk Seri Azmir Merican.
PETALING JAYA: Sime Darby Property Bhd
is anticipating sustained momentum in the second half of 2024 (2H24), driven by a healthy demand and rising sales volume.
The group believes its ongoing transformation into a leading real estate player remains on track, with group managing director Datuk Seri Azmir Merican commenting that the company’s strong 1H24 performance indicates that its strategic initiatives are well-positioned.
Sime Darby Property achieved record numbers in its latest results for the second quarter ended June 30 (2Q24), since the 2017 demerger of the Sime Darby group, with net profit more than doubling year-on-year (y-o-y) both for the quarter and the half-year to RM162mil and RM285.5mil respectively.
Revenue for the quarter under review also surged 74.6% y-o-y to RM1.2bil, as it jumped 58.8% for 1H24 to RM2.2bil.
The group attributed its stellar financial performance primarily to sustained sales momentum across a diversified product mix with greater contributions from both industrial and high-rise residential products, and improved site progress within its property development division.
“The property development segment remained the major contributor to our revenue, accounting for 95% of the group total. It was supported by material land sales in City of Elmina and Lembah Acob, Selangor,” it said in a statement to Bursa Malaysia.
Sime Darby Property added that the segment’s strong profit of RM480.8mil reflects a 1.5 times increase in earnings compared to the corresponding period in the previous year.
Moreover, it said higher sales and on-site development activities in Bandar Bukit Raja, Serenia City, City of Elmina, KLGCC Resort, Elmina Business Park and Ara Damansara townships also drove up earnings. At the same time, the group said its investment and asset management segment also saw an increase in 1H24 revenue by 10.7% y-o-y to RM58.1mil, as compared to RM52.5mil a year ago.
Explaining further, it said turnover improvement was mainly propelled by the retail sub-division, which was supported by an increase in the KL East Mall occupancy rate to 96% during the period under review from 86% previously, as well as from higher rental rates resulting from tenant rental renewals.
“The segment recorded higher profit of RM13.8mil prior to the share of results of joint ventures and associates, mainly attributable to the revenue growth from the retail sub-segment,” said the group.
Despite the gains, Sime Darby Property was transparent to reveal that the division’s results turned to a loss of RM58.4mil after share of results of joint ventures (JVs) and associates, predominantly due to a negative accounting impact from MFRS (Malaysian Financial Reporting Standards) 17 “Insurance Contract” and higher finance costs.
The accounting effect was in relation to a five-year rental guarantee with potential price adjustments on the disposal of properties by the joint venture, it reported.
On this note, securities firm RHB Research commented that Sime Darby Property had incurred a RM87.9mil share of JV losses in 2Q24.
The brokerage revealed that it is related to a five-year rental guarantee on the disposal of an office tower in London by the Battersea Power Station consortium.
Notably, the research house added: “While Sime Darby Property’s management is likely to elaborate more during today’s analysts briefing, S P Setia Bhd’s management team indicated that the accounting impact was already based on fairly conservative assumptions.
“Hence, we believe future losses (if any) related to the rental yield guarantee could be minimal.”
Compared to the previous quarter ended March 31, net profit also escalated 31.1% from RM123.6mil, buoyed by an increase in turnover of 22.9% from RM978.7mil.
It said the quarterly improvement was down to strong segment results from its property development segment and a turnaround in the leisure division from a loss in 1Q24 to a profit in the current period.
Meanwhile, the group launched products totalling RM2.3bil in gross development value (GDV) for 1H24, achieving 59% of the full-year target of RM3.9bil.
It said: “Industrial products accounted for 37% of the launches, followed by residential high-rise at 33% and residential landed at 21%.
“Residential properties continued to generate strong demand, as demonstrated by products such as The Ophera, a premium residential high-rise at KLGCC Resort, achieving an 81% take-up rate, and Elmina Ridge 1, achieving a 95% take-up rate.”
The group said overall, the average take-up rate for all products had amounted to 77% as at Aug 11.
Sime Darby Property reported an unbilled sales of RM3.7bil up to June 30, which it says will ensure revenue stability for the next three years.
Concurrently, it said completed inventories reduced by 20.7% to RM369.6mil from RM466.3mil in the previous quarter ended March 31, while cash balances remain healthy at RM603.7mil, coupled with a net gearing ratio of 22.3%.
Sime Darby Property declared a dividend of 1.5 sen per share during the quarter, amounting to a payout of RM102mil, which also represents a 50% y-o-y increase from the one sen per share announced in 2Q23.
Understandably, RHB Research is maintaining a “buy” call on the company with a target price of RM2, saying in a write-up yesterday that the group’s net profit had exceeded expectations.
It said the recent sell-down represents a good buying opportunity on the counter, noting: “Apart from Sime Darby Property’s strong property sales, further news flows on data centre-related real estate deals are expected to buoy sentiment on the stock.”
Looking ahead, Azmir observed that Sime Darby Property is on course to achieve its targets, while reiterating the group’s commitment to create value for all stakeholders by seizing current market opportunities and ensuring long term growth and sustainability.
On Nov 30, 2017, Sime Darby group was “pure played” into Sime Darby Bhd, Sime Darby Property and Sime Darby Plantation Bhd, with the latter now known as SD Guthrie Bhd since May 31 this year.
