Sime Darby Property Bhd

Hold. Target price: RM0.86

Source: Maybank Investment Bank

SIME Darby Property’s overall ESG score of 63 is above average, which is close to its sector peer, namely Sunway (SWB MK, BUY, CP: RM3.37, TP: RM3.03) at 74 (above average). SDPR’s score was dragged by the rising trend in water and waste intensity under the “E” segment. Additionally, lost time injury frequency (LFIT) rate jumped in FY22. There was a recordable fatality of a contractor worker in FY22.

Positively, SDPR has relatively better disclosures as compared to the other developers under our coverage. It has also clearly stated its medium-term ESG targets in FY22. SDPR has begun developing its Net Zero pathway with a strategic partner to chart its carbon footprint reduction, focusing on its operational carbon Scope 1 and Scope 2 before establishing a baseline for Scope 3 in 2023.

SDPR is focusing on expanding its investment property portfolio for future income sustainability. In end-2023, SDPR’s unbilled sales stood at RM3.6 billion (0.8x of our FY24E revenue). We like SDPR for its large exposure in the landed and industrial property segments as well as its healthy balance sheet with 0.22x net gearing as at 4Q23. SDPR currently trades at 0.6x FY24E P/B.

SDPR is a constituent of the MSCI ACWI Small Cap Index with MSCI ESG Rating of BBB and was rated by the Carbon Disclosure Project (CDP) where SDPR was rated C for Climate Change and B Minus for Supplier Engagement. SDPR scores above-average in our proprietary scoring methodology with an overall score of 63/100.

We maintain our earnings forests, RM0.86 TP (on unchanged 0.6x FY24E PBV) and HOLD rating.