KUALA LUMPUR: Sime Darby Property Bhd is likely to post stronger earnings in the third quarter of financial year 2024 (3QFY24) on accelerated progress billings and higher profit margins, according to CGS International.
The firm said that positive expectation follows resilient sales of RM2.1 billion recorded in the first half (1H) of this year, which was up 40 per cent from the first half of 2023.
It also believed the group might beat its revised FY24 new sales target of RM3.5 billion, if the strong sales growth is sustained into 2HFY24.
CGS International projects that Sime Darby Property could book as much as RM3.9 billion in new sales in FY24.
"Our more bullish view is premised on the commendable take-up rates of its newly launched projects, whereby new projects in 1H24 worth RM2.3 billion were well-received with an average take-up of about 76 per cent," it said in a research note today.
Therefore, the research firm lifts the company's core earnings per share (EPS) for FY24-26 by 18 to 19 per cent on higher progress billing and profit margin assumptions.
It maintained its "add" call with a higher target price of RM1.94 a share.
According to CGS International, the property developer is building up its investment properties portfolio to broaden the recurring income stream to 30 per cent of the group's earnings by end-FY25F.
The firm expects the earnings from this segment to grow exponentially in FY24 until FY27 with the addition of new assets including Elmina Lakeside Mall, Senada Mall, hyperscale data centre (DC) at Elmina Business Park, and Metrohub 1 and 2 by end-FY24.
"We estimate that the four new assets could bring in additional annual profit after tax of around RM118 to 129 million from FY27 onwards. Note that the investment properties segment contributed 5.0 per cent of our revised assets market value (RNAV)," it said.
CGS International also anticipates KL East Mall to deliver better earnings supported by a higher occupancy rate of 96 per cent as of end-Jun 24, from 90 per cent at end-Dec 23, and increased rental rates following the rent reversion back in late 2023.
Although management may consider monetising these investment properties through a real estate investment trusts (REIT) listing, the firm does not expect this to materialise by end-FY26F, as more time is needed for these assets to mature.
At midday break, Sime Darby Property's share price rose 2 sen or 1.4 per cent to RM1.41, valuing the company at RM9.59 billion.