OPtimising resources

SIME Darby Property Bhd is undertaking aggressive corporate exercises to unlock the value of its RM18.8 billion landbank. Analysts say the land could generate RM100 billion in gross development value for the company.

SIME Darby Property Bhd, already considered a giant property developer in the country, is set to morph further as its landbank has the potential to generate RM100 billion in gross development value, say analysts.

Aggressive corporate exercises, which have almost zero net gearing, are already in motion to unlock the land value, currently standing at RM18.8 billion.

“Property sales for the group are still below its potential (given its vast landbank) at average of RM2 billion per annum in the last few years... We believe the value in its holdings is too big to ignore,” said an analyst.

Another analyst said once Sime Darby Property monetises or develops more of its landbank in the near term, it will offer further upside potential to its share price. This may provide a rerating catalyst to the property developer’s target price.

Five of eight analysts tracked by NST Business backed Sime Darby Property to outperform the FTSE Bursa Malaysia KLCI this year by 10 per cent or higher in the next 12 months.

Target price consensus is relatively high for Sime Darby Property, at RM1.77.

Public Investment Bank (PublicInvest) analyst Tan Siang Hing said potential catalysts for Sime Darby Property come mainly from asset monetisation, which is also part of the group’s strategy to assess the best use of each piece of land, while disposing of non-strategic ones.

“Given its large tracts of land, we believe Sime Darby Property would continue to unlock land value via outright disposal or collaborations with strategic partners,” Tan said in a report.

Right-sizing the group’s land bank is essential to ensure the optimal use of its resources, he added.

PublicInvest has an “outperform” recommendation on Sime Darby Property with a target price of RM1.90.

Sime Darby Property is developing 23 townships, integrated and niche development projects on 4,866.7ha (58 per cent of total landbank) with the remaining 3,535.7ha reserved for future development, said Tan.

“The landbank is mainly located near major highways and within key growth areas and economic corridors in Peninsular Malaysia with low historical holding costs,” he added.

Meanwhile, CIMB Equities Research sees further upside to the property developer’s revalued net asset value and target price. This is provided Sime Darby Property manages to monetise or develop the landbank especially the additional land under the Malaysia Vision Valley (MVV) option agreements and land option agreements.

The research house has a target price of RM1.85 and an “add” recommendation for Sime Darby Property, of which valuation does not include the potential value enhancement from MVV development.

Maybank Investment Bank Bhd said thanks to its huge landbank, Sime Darby Property has the best of both worlds as a developer and land seller.

“While the former ensures a more stable earnings income, the latter will provide an immediate boost to income,” it added.