Sime Darby Property may pay higher dividends

PETALING JAYA: Sime Darby Property Bhd shareholders can expect higher dividend payouts in the future, as the developer’s ongoing initiative of disposing non-strategic land will bolster its coffers.

CIMB Research said in a report that Sime Darby Property has been disposing plots of land outside of its key projects to enhance land value and expedite development via other developers.

“The group has identified land for disposal (for example, in Kedah) and will be rewarding shareholders through dividends.

“Given its near-net-cash balance sheet and potentially higher profit from land disposals, we do not rule out the possibility of a higher dividend payout in the future versus its current dividend policy of a 20% payout.”

The research house highlighted that Sime Darby Property is still Malaysia’s largest property developer in terms of landbank size of 20,743 acres, with a remaining gross development value (GDV) of RM96bil.

“These exclude the additional 20,599 acres of land under option agreements with Sime Darby Plantation and Sime Darby Bhd. Most of the group’s landbank is strategically located with good connectivity – either with easy access to expressways or public transportation.”

Separately, CIMB Research said Sime Darby Property organised a site visit to its 40%-owned Battersea Power Station (BPS) to provide investors greater insight into the London project.

“BPS spans across 42 acres of land, with an estimated total GDV of £9bil (RM49bil) that will be launched over seven phases.

“The overall BPS project looks attractive, as the land acquisition cost of £400mil (RM2.2bil) translates to only around 4% of the total estimated GDV (compared with 10% to 20% for normal projects).

“Phase 1 has been completed, and Phase 2 will be ready by end-2020,” the research house said.

Of the 1,661 residential units launched year-to-date (Phases 1 to 3a), 1,473 units have been sold, with an average take-up rate of 90%, said CIMB Research.

“The Phase 1 commercial area (107,000 sq ft) is 95% leased out, while the Phase 2 office is 90% leased out to Apple Inc for its new European headquarters. Most of the Phase 1 residential units have been completed and handed over, while the retail and food and beverage tenants operating now.”

The research house also said the recently proposed acquisition of the second phase’s commercial assets by Permodalan Nasional Bhd and the Employees Provident Fund at £1.6bil (RM8.8bil) is fair.

“We believe this is positive, as the group will be able to monetise the asset and focus on the remaining development of BPS. We are keeping our forecasts at the moment, as discussions are at a preliminary stage.”

CIMB Research said it valued the stock based on a 50% discount to its estimated realised net asset value, translating to a target price of RM1.85.