Exciting times ahead for SimeProp

The rise in Sime Darby Property Bhd share price is nothing less than stellar. It touched a year thigh of RM1.69 on July 29 but succumbed to profit taking, resulting it to fall to RM1.25 a few days later. However, investors started to accumulate the shares and it has now surged to RM1.47 on Sept 17.

Financially, the property developer has been quite sound. It was profitable in 4 of the past 5 financial years. Net profit decreased from the peak of RM598.5 million in FYDec19 to a low of a loss of RM501.6mil in FYDec20, but had recovered since.

Net profit in FYDec23 was RM407.9 million. The increase in net profit was driven by higher revenue and improved margin. In the recent three quarters, the company’s results had been inconsistent. Total net profit during the period was higher year-on-year mainly due to increased revenue and better margin.

Its net profit more than double y-o-y to RM161.96 million in the second quarter (2Q) of the year, thanks to land sales and higher sales of industrial and high-rise homes.

It is also positive to note that the company’s debt level is moderate, with net gearing ratio of 0.3x. Current ratio of 1.9x indicates that it has sufficient liquid assets to pay off short-term liabilities. SimeProp is currently trading at a price earnings (PE) ratio of 17.6x, which is higher than most peers.

Interest in the property developer could stem from its aggressive plan for data centre development. In May, the property developer announced its plan to build and lease a hyperscale data centre for Google at its Elmina Business Park, marking its entry into the data centre segment. The project, valued at RM2 billion, is expected to be completed by 2026.

The Google data centre at the Elmina Business Park will support the tech giant’s digital services, including Search, Maps and Workspace. This facility will make Malaysia one of the countries where Google has established and operates data centres, joining India, Singapore, Jakarta and Japan.

Currently, Sime Darby Property has five industrial park projects, with total remaining land area of over 2,000 acres. Sime Darby Property has raised its sales target for the financial year ending Dec 31, 2024 (FY2024) to RM3.5 billion from RM3 billion. It plans to start selling 1,855 new units from projects with a gross development value of RM1.57 billion in the second half of the year.

The new launches will primarily feature 1,287 high-rise residential units and 321 landed homes across various locations, including City of Elmina, Bandar Bukit Raja, Serenia City, KL East and Putra Heights. Also in the pipeline are 79 industrial units at the Elmina Business Park, Bandar Bukit Raja, and Nilai Impian.

Being one of the biggest property developers in Malaysia and with exposure in the UK’s Battersea project, investors will want to take a slice of this growing company.