SIME DARBY PROPERTY BHD

Target price: RM1.53

MAYBANK IB Research has upgraded its recommendation on Sime Darby Property to “buy,” saying that the share price weakness of the property developer has created a buying opportunity.

The research house also noted that Sime Darby Property’s Battersea Power Station phase two commercial space sale is at its final stage and the timeline to seal the deal by July 2018 is on track.

With regard to the property developer’s Malaysia Vision Valley (MVV) project, the company will proceed with its planned development even without the Kuala LumpurSingapore High Speed Rail station at Labu.

Sime Darby Property is now working with the state government of Negeri Sembilan to improve the land accessibility for the MVV project.

Maybank IB Research also added that a highway spanning 17 kilometres from Nilai to Bandar Enstek via Labu, which will be completed by 2021, has been approved and it should help to improve the accessibility of the MVV land.

On Sime Darby Property’s expected sales, the research house indicated that the property developer may not meet its RM2bil sales target in the financial year of 2018 (FY18).

“While demand on the company’s properties has finally picked up in June 2018, its fullyear sales target will still be dragged by the weak buying sentiment pre-14th general election.

“Hence, there is a high possibility that its RM2bil sales target for FY18 may not be met.

“Elsewhere, the management is looking to dispose about 2,000 acres of non-core land in Kedah, Sabah and Australia over the next 18 months, which have a combined of around RM385.4mil,” it said in a note.

Maybank IB Research has lowered its FY1820 earnings forecasts for the property developer, to factor in lower property sales forecast for FY18, a 39-acre land sale to Mitsui in FY18 and lower land sales assumptions for FY19-20.