PROPERTY PROPERTY 26 Nov 2020 ( SDPR MK EQUITY, SIPR.KL )

Company report New launches reported strong take-up rates of 84% HOLD

Thong Pak Leng (Maintained) [email protected] 03-2036 2025 Rationale for report: Company update

Price RM0.58 Investment Highlights Fair Value RM0.60 52-week High/Low RM0.94/RM0.48  We maintain our HOLD recommendation on Sime Darby Key Changes Property (SimeProp) with an unchanged fair value (FV) of Fair value  RM0.60 based on a 60% discount to RNAV (Exhibit 1). We EPS  make no changes to our FY20–FY22 net earnings forecast.

YE to Dec (RM mil) FY19 FY20F FY21F FY22F  SimeProp held an analyst briefing earlier today to shed more light on its recently announced 9MFY20 results. Here are the Revenue (RM mil) 3,180.0 1,705.9 2,733.7 3,556.6 key takeaways: Core net profit (RM mil) 312.0 103.3 226.1 378.6 FD Core EPS (sen) 4.6 1.5 3.3 5.6 1) Sales target. SimeProp chalked up new sales of RM1.3bil in FD Core EPS growth (%) (456.0) (66.9) 118.9 67.4 9MFY20 whereby 48.5% are derived from newly launched landed Consensus Net Profit (RM mil) - 116.0 338.6 288.6 residential projects namely Ilham Residences in Elmina East and DPS (sen) 1.0 0.3 0.7 1.1 Lumira 1 in Bandar Bukit Raja 2 & 3, Klang. Management is PE (x) 12.6 38.2 17.4 10.4 maintaining its sales target of RM1.4bil for FY20. EV/EBITDA (x) 17.6 45.6 23.8 14.1 2) Unbilled sale increased remained flat QoQ at RM1.5bil, of Div yield (%) 1.7 0.5 1.1 1.9 which 78.2% were from projects in flagship townships (Elmina ROE (%) 3.3 1.1 2.3 3.7 Net Gearing (%) 25.3% 18.6% 21.5% 21.9% West, Bandar Bukit Raja and Serenia City – all in Selangor). 3) New launches and take-up rates for 9MFY20. SimeProp has

launched projects worth RM1.3bil in GDV in 9MFY20 with its Stock and Financial Data main focus on landed residential properties. These new launches received take-up rates of 84% as of 15 Nov 2020. Meanwhile, the Shares Outstanding (million) 6,800.8 company is planning to launch new projects worth RM200mil in Market Cap (RM mil) 3,944.5 Book Value (RM/share) 1.43 GDV in 4QFY20. P/BV (x) 0.4 4) Efforts to reduce inventory levels. SimeProp will carefully ROE (%) 6.3 review its new launches, taking into account of its existing Net Gearing (%) 25.3% inventory level. Completed inventories increased by 9.2% YoY to RM582mil due to the completion of ongoing developments mainly Major Shareholders Skim Amanah Saham 51.7% from The Ridge in KL East and industrial lots in Elmina East. EPFBumiputera 9.7% KWAP 6.3% 5) Maintaining strong cash flow. The company’s immediate Free Float 32.3% priorities for FY20 will be on cash flow management, active Avg Daily Value (RM mil) 2.02 marketing and sales campaigns, inventory management and cost reduction. SimeProp will remain focused on growing its core Price performance 3mth 6mth 12mth development business by offering properties within the affordable

Absolute (%) (10.1) (6.5) (23.5) and mid-range price points (RM500K–RM800K) in its flagship Relative (%) (2.2) (12.8) (26.7) township developments such as Elmina and Bandar Bukit Raja. SimeProp will also increase the use of digital marketing channels

such as emails, news portals and social media, as well as virtual 1.80 2,000 showrooms. 1.60 1,900 1.40 1,800  To recap, SimeProp registered a core net profit of RM52.4mil 1.20 1,700 (-80.9% YoY) for 9MFY20. The lower earnings are mainly due 1.00 1,600 to the impact of the movement control order (MCO), Covid-19 0.80 1,500 pandemic and share of loss from JV projects. 0.60 1,400 0.40  We believe the long-term outlook for SimeProp remains 0.20 1,300 stable, premised on inventory-clearing activities and a healthy 0.00 1,200 balance sheet. As there is little upside potential, we maintain Jul-18 Jul-19 Jul-20 Jan-18 Jan-19 Jan-20 our HOLD recommendation on SimeProp. Oct-18 Oct-19 Oct-20 Apr-18 Apr-19 Apr-20

SDPR MK Equity FBMKLCI Index

Sime Darby Property 26 Nov 2020

EXHIBIT 1: SOP VALUATIONS Remaining landbank Outstanding GDV DEVELOPMENT PROPERTIES NPV @11% (RM mil) Stake (acres) (RM bil) Niche / Integrated ALYA, Kuala Lumpur 50.5 7,200.0 331.1 100.0% Chemara Hills, Seremban 3.0 40.0 1.8 100.0% USJ Heights, 11.1 200.0 9.2 100.0% SJ 7, Subang Jaya 34.6 5,300.0 243.7 100.0% SJCC, Subang Jaya 28.1 3,600.0 165.5 100.0% KL East 50.8 2,200.0 101.2 100.0%

Township City of Elmina: Elmina West, Shah Alam 2,491.6 15,200.0 698.9 100.0% City of Elmina: Elmina East, Shah Alam 583.2 2,500.0 115.0 100.0% City of Elmina: & Bukit Subang 143.9 1,000.0 46.0 100.0% Bandar Bukit Raja 2 & 3, Klang 2,665.0 11,600.0 533.4 100.0% Bandar Bukit Raja 1, Klang 160.6 1,100.0 50.6 100.0% Serenia City, Dengkil, Sepang 1,462.0 8,900.0 409.2 100.0% , Subang Jaya 77.4 3,400.0 156.3 100.0% , 80.3 6,000.0 275.9 100.0% , Shah Alam 154.2 1,100.0 50.6 100.0% Saujana Impian, Kajang 4.1 30.0 1.4 100.0% Taman Melawati, Ulu Klang 2.3 200.0 9.2 100.0% Nilai Impian 2, Nilai 426.0 3,100.0 142.5 100.0% Nilai Impian 1, Nilai 157.6 900.0 41.4 100.0% Bandar Ainsdale, Seremban 157.7 1,100.0 50.6 100.0% Planters' Haven, Nilai 83.6 100.0 4.6 100.0% Bandar Universiti Pagoh, Muar 3,262.0 5,500.0 252.9 100.0% Taman Pasir Putih, Pasir Gudang 16.3 200.0 9.5 100.0%

Unbilled sales 1,562.4 156.2

Future developmenmt 8,425.0 8,400.0 152.7 100.0% Total Local 20,530.9 90,432.4 4,009.5

JV Battersea Power Station 23.0 36,000.0 437.9 40.0%

DCF of future profits 126,432.4 4,447.4 - Inventories 4,543.6 Investment properties 745.1 Other investments 2,920.6 Net debt (2,459.9) Total 10,196.7 Less 60% discount (6,118.0) Total 4,078.7

Enlarged share base (mil shares) 6,800.9 Fair value per share 0.60

Source: AmInvestment Bank Bhd

AmInvestment Bank Bhd 2 Sime Darby Property 26 Nov 2020

EXHIBIT 2: FINANCIAL DATA Income Statement (RMmil, YE 31 Dec) *6MFP18 FY19 FY20F FY21F FY22F

Revenue 1,269.1 3,180.0 1,705.9 2,733.7 3,556.6 EBITDA 248.8 363.8 126.4 255.8 440.4 Depreciation/Amortisation (22.2) (53.1) (28.5) (45.7) (59.4) Operating income (EBIT) 226.6 310.7 97.9 210.1 381.0 Other income & associates (47.4) (29.8) (20.2) (36.4) (55.7) Net interest 13.7 98.3 52.7 84.5 110.0 Exceptional items (231.1) 286.5 0.0 0.0 0.0 Pretax profit (38.1) 665.7 130.5 258.2 435.3 Taxation (273.0) (74.8) (31.3) (38.7) (65.3) Minority interests (7.5) 7.7 4.1 6.6 8.6 Net profit (318.7) 598.5 103.3 226.1 378.6 Core net profit (87.6) 312.0 103.3 226.1 378.6

Balance Sheet (RMmil, YE 31 Dec) *6MFP18 FY19 FY20F FY21F FY22F

PPE 640.4 636.3 668.1 701.5 736.6 Intangible assets 3.5 4.1 4.1 4.1 4.1 Other long-term assets 9,492.4 10,165.8 10,211.2 10,257.1 10,303.5 Total non-current assets 10,136.3 10,806.2 10,883.5 10,962.8 11,044.2 Cash & equivalent 649.1 744.3 784.3 798.8 823.0 Inventories 2,574.5 1,989.8 1,121.7 1,752.6 2,192.4 Trade receivables 736.6 628.7 560.8 898.8 1,169.3 Other current assets 931.9 1,238.8 413.8 639.1 819.4 Total current assets 4,892.1 4,601.7 2,880.6 4,089.2 5,004.1 Trade payables 1,390.2 1,385.4 747.8 1,168.4 1,461.6 Short-term borrowings 1,347.8 796.1 490.2 499.3 514.4 Other current liabilities 580.3 450.3 295.2 403.3 489.9 Total current liabilities 3,318.3 2,631.9 1,533.2 2,071.0 2,465.9 Long-term borrowings 1,925.2 2,408.1 2,114.4 2,450.7 2,562.8 Other long-term liabilities 426.4 492.3 264.1 423.2 550.6 Total long-term liabilities 2,351.6 2,900.4 2,378.5 2,873.9 3,113.3 Shareholders’ funds 9,209.5 9,721.7 9,804.3 9,985.2 10,288.1 Minority interests & perpetual bond 236.9 228.3 122.5 196.3 255.3 BV/share (RM) 1.35 1.43 1.44 1.47 1.51

Cash Flow (RMmil, YE 31 Dec) *6MFP18 FY19 FY20F FY21F FY22F

Pretax profit (38.1) 665.7 130.5 258.2 435.3 Depreciation/Amortisation 22.2 53.1 28.5 45.7 59.4 Net change in working capital 3,067.3 575.7 143.3 (440.1) 0.0 Others (3,396.4) (589.3) 436.3 (70.2) 0.0 Cash flow from operations (345.1) 705.2 738.6 (206.3) 494.7 Capital expenditure 94.7 (11.8) (31.8) (33.4) 0.0 Net investments & sale of fixed assets (2,629.8) 0.0 (45.4) (45.9) 0.0 Others 2,096.2 81.8 0.0 0.0 0.0 Cash flow from investing (438.9) 70.0 (77.3) (79.3) 0.0 Debt raised/(repaid) 730.1 (88.5) (599.7) 345.3 0.0 Equity raised/(repaid) 0.0 0.0 0.0 0.0 0.0 Dividends paid (204.0) (136.0) (20.7) (45.2) 0.0 Others (73.7) (169.7) 0.0 0.0 0.0 Cash flow from financing 452.3 (394.2) (620.3) 300.1 0.0 Net cash flow (331.7) 381.0 41.0 14.5 494.7 Adjustments 0.3 (0.3) 0.0 0.0 0.0 Net cash/(debt) b/f 749.4 649.1 743.3 784.3 0.0 Net cash/(debt) c/f 418.0 1,029.8 784.3 798.8 494.7

Key Ratios (YE 31 Dec) *6MFP18 FY19 FY20F FY21F FY22F

Revenue growth (%) (46.1) 150.6 (46.4) 60.3 30.1 EBITDA growth (%) (22.8) 46.2 (65.2) 102.3 72.2 Pretax margin (%) (3.0) 20.9 7.6 9.4 12.2 Net profit margin (%) (25.1) 18.8 6.1 8.3 10.6 Interest cover (x) nm nm nm nm nm Effective tax rate (%) 715.8 11.2 24.0 15.0 15.0 Dividend payout (%) nm 11.4 20.0 20.0 20.0 Receivable turnover (days) 211.8 72.2 120.0 120.0 120.0 Inventory turnover (days) 1,072.3 261.9 332.9 191.9 202.4 Payable turnover (days) 409.6 159.3 228.2 127.9 135.0 * 6-month FPE 31 Dec.

Source: AmInvestment Bank Bhd estimates

AmInvestment Bank Bhd 3 Sime Darby Property 26 Nov 2020

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