Sime Darby Property banking on good prospects continuing

PETALING JAYA: Sime Darby Property Bhd expects to sustain a favourable outlook this year on the back of improved affordability due to easing interest rates, anticipated recovery of the ringgit, and continued stabilisation of labour availability.

Group managing director Datuk Azmir Merican said despite challenges posed by fluctuating raw-material prices and the exchange rate, the company remains optimistic about its ability to maintain its performance going into 2024, as it continues to be cost-cognizant while monitoring the market.

“The weak ringgit affects us in terms of the price of raw materials as we use imported materials. We foresee construction costs to increase by 0.15%-0.25% for every 1% depreciation of the ringgit against the US dollar.

“As such, we think our margins could be affected if the situation of the weak ringgit persists,” he said at the company’s media briefing for its full-year results for the financial year 2023 (FY23) yesterday.

Azmir said the group is hopeful macroeconomic conditions will be stable, and should the ringgit strengthen by the end of this year as projected by analysts, the company will be able to pass on cost increases to its customers.

“Overall, property developers are experiencing higher costs which are leading to higher purchase prices. However, there is only so much one can do to increase prices until it reaches a point where the take up rate begins to slow down.

“For FY23, our profit after taxation and minority interests increased by 29.2% yearon-year (y-o-y) to Rm407.9mil. This was because we were able to progress well on our sites as the labour situation had improved substantially from where we were in 2022.

“This enabled us to build faster and as you know time is money and is a cost. Hence, we were able to protect our margins better than expected,” he said.

From a long-term perspective, Azmir said the gradual easing of interest rates in the United States and Britain are likely influence monetary-policy decisions around the world. He said if that happens, Malaysia will also likely follow suit.

“This is an outlook for a lot of property developers. When the cost of buying homes becomes cheaper, affordability increases which means a more positive market sentiment.

“This is expected to happen in 2024. It is also much more favourable for us in Britain, where we have expensive properties in per square feet terms, given their location. So in terms of outlook, its positive for us,” he said.

Moreover, Azmir said the group is also spending some resources to invest in its investment and asset management segment.

“We need to invest in recurring income. We want to see this part of the business grow a lot better than over the last two to three years,” he said.

For FY24, Sime Darby Property aims to launch Rm3.9bil worth of products comprising 34% industrial, 32% residential landed, and 31% residential high-rise developments. The group also has a sales target of Rm3bil and a gross profit margin target of 20%-25%.

Azmir said FY23 had been an exceptionally good year for the group as it recorded its highest revenue, gross profit and operating profit since its de-merger in 2017.