Sime Darby Property Bhd
(Jan 18, RM1.59)
Maintain buy with a target price (TP) of RM1.85: Sime Darby Property Bhd recently organised a site visit for sell-side analysts to the City of Elmina, Shah Alam, Selangor, in conjunction with the opening of the Elmina Interchange (Exit 3504). The visit was hosted by Appollo Leong, general manager of Business Unit 1 (City of Elmina, Denai Alam, Bukit Jelutong & USJ Heights Townships).
The 5,000-acre (2,023.43ha) City of Elmina, which includes Elmina West (2,661 acres), Elmina East (1,089 acres), Denai Alam and Bukit Subang (1,250 acres), is located along the Guthrie Corridor Expressway (GCE). With a remaining developable area of 3,583 acres and remaining gross development value (GDV) of RM20.4 billion, it is currently the biggest township in Sime Darby Property’s portfolio. It contributes about 24% of the total remaining GDV of RM85.9 billion.
City of Elmina is located 21km west of Kuala Lumpur City Centre. The township has good connectivity via the GCE (through Denai Alam and Elmina Interchange), Shah Alam-Batu Arang Highway, New Klang Valley Expressway, Kuala Lumpur-Kuala Selangor Expressway, and the proposed Damansara-Shah Alam Elevated Expressway (DASH), which is slated for completion in 2020. DASH will shorten the travelling time from Batu Arang-Penchala to 15 minutes versus one hour by the old route.
Year-to-date financial year 2018 (FY18), Sime Darby Property has launched projects with a GDV of RM245.2 million in City of Elmina. For the second half of FY18, we expect the group to launch another RM618 million GDV worth of projects in City of Elmina. The launches in City of Elmina will contribute about 33% of its planned GDV launches of about RM2.6 billion in FY18. With the recent ramp-up in project launches, we believe FY18 sales will likely exceed FY17 sales of RM1.92 billion.
While we expect the property market in 2018 to stay uninspiring, we think the group will likely benefit from the upcoming high-speed rail project and development of the Malaysia Vision Valley.
We value the stock based on a 50% discount to our estimate of its revalued net asset value, translating into a TP of RM1.85. The large discount versus an average of 35% for the other property stocks under our coverage reflects the slower monetisation and longer gestation period of its considerable land bank. A key risk to our call is further deterioration in sentiment in the property market. — CIMB Research, Jan 17