Latest news with #RM232mil
The Star
20-06-2025
- Business
- The Star
Property portfolio, data centres to lift SimeProp
CGSI Research said there would be a number of income streams for SimeProp. PETALING JAYA: Sime Darby Property Bhd 's (SimeProp) accelerating growth on the back of recurring income from the significant expansion of its investment property portfolio has CGS International Research (CGSI Research) reiterating its 'add' call on the stock with an unchanged target price of RM1.90. CGSI Research said there would be a number of income streams for SimeProp, including the recent acquisition of two double-storey logistics warehouses in Bandar Bukit Raja in Selangor that cost RM232mil. The research house said it estimates that the acquisition could contribute between RM7mil to RM8mil in net profit annually, assuming there is a 7% net property income yield. 'Furthermore, we gathered from management during the first quarter (1Q25) results briefing that the group has retained some of their commercial and industrial units to lift rental income,' the research house said. Among them is the KLGCC Mall in Kuala Lumpur that is set to open to the public in the second half of this year (2H25), further boosting the group's portfolio of retail assets. The property developer's commencement of built-to-lease data centres at Elmina Business Park in Selangor is also set to boost recurring income from next year (FY26) onwards. 'Phase one and two of the data centre assets are on track for completion by end-FY26 and 1H27, respectively. We project the investment property portfolio to contribute about RM119mil in net profit by FY27, making up 11% of the group's net profit,' CGSI Research said. However, the research house expects SimeProp to be negatively affected by the 6% sales and service tax (SST) on construction services, as it directly leads to higher construction costs for its commercial and industrial products. On a more promising note, construction as well as rental and leasing services for residential buildings, which account for over 50% of SimeProp's sales are exempted under the expanded SST, thus limiting the overall impact. This could result in SimeProp's profit margins remaining intact in the short term. 'Nevertheless, we do not rule out the risk of softer sales in its commercial and industrial segments as elevated property prices may temper buyer sentiment, potentially leading to deferred purchases or weaker property demand,' CGSI Research said. The research house said following a weaker 1Q25 for SimeProp, it now continues to anticipate stronger quarterly earnings for the group for the rest of FY25 as progress billings pick up pace. 'The valuation has also reverted to a palatable FY26 price-earnings of 15 times, which we deem compelling given the encouraging FY25 to FY27 earnings growth trajectory,' it said. The research house added downside risks include wider losses from the Battersea Power Station development in Britain and slower property launches, while re-rating catalysts were stronger sales growth and further expansion of SimeProp's data centre business. SimeProp's shares closed at RM1.42 in yesterday's trading.
The Star
20-05-2025
- Business
- The Star
SimeProp's industrial properties to lift earnings
PETALING JAYA: Sime Darby Property Bhd (SimeProp) has achieved 100% take-up for the latest instalment of its linked homes in The Nine, Elmina Green, development located in Shah Alam, Selangor. In a statement, the developer said the latest launch saw all 192 double-storey linked homes snapped up, reinforcing the strong demand observed during a March preview. Targeted for completion in June 2026, The Nine, Elmina Green has a gross development value of RM198.2mil. Built-up areas for the homes range from 2,000sq ft to 2,342sq ft, with prices starting from RM921,888. Meanwhile, RHB Research said in a report that SimeProp's earnings potential from the upcoming lease of two data centres in Elmina Business Park is under-appreciated by the market. The research house noted that management also strengthened its investment-property portfolio recently by acquiring the remaining stake in two modern logistics warehouses that are worth RM232mil, potentially paving the way for a real estate investment trust (REIT) listing in one to two years. 'The REIT should have a high concentration of good quality industrial properties, which should garner a premium valuation,' RHB Research said. Thus far, SimeProp's Data Centre 1 project is on track to be completed in the third quarter of 2026 (3Q26) while the construction work for Data Centre 2 should be up for tender in the second half of this year with completion in 2027. 'While the financing plan for Data Centre 2 has yet to be firmed up, we highlight that SimeProp recently successfully raised a RM800mil sukuk at very attractive rates averaging 4.02% with a tenure of seven to 15 years, and the sukuk was 6.74 times oversubscribed,' the research house said. RHB Research noted that the funds raised would mainly be used for long-term working capital to grow the industrial, logistics and data centre portfolio. 'We do not discount the possibility that SimeProp may look to gear up further to grow its investment-property portfolio. Based on the 2024's financials, the company has debt headroom of RM3.7bil before it hits 0.6 times net gearing (currently at 0.24 times), which should not be a big concern in our view as a REIT listing is always a wild card,' the research house said. RHB Research said the 20-year leases of two data centres are worth RM7.6bil in total. Assuming the group will own 100% of both, the research house estimates that the leases for the data centres could contribute about RM150mil to RM160mil a year after interest and tax in the initial years, boosting net profit by more than 20% from FY28 onwards. The leases are also expected to grow progressively over a 20-year period due to the step-up feature. Currently, SimeProp also has a total of 1.48 million sq ft of net lettable retail area, including the upcoming KLGCC Mall. 'However, its industrial property portfolio is more sizeable, as it currently includes the two logistics warehouses in Bandar Bukit Raja (RM232mil), two hyperscale data centres (around RM6bil), as well as Metrohub 1 and 2 in Bandar Bukit Raja, Selangor, where SimeProp has a 27.4% interest,' RHB Research said. The research house added the group's seven industrial park projects that it currently has in Selangor, Negri Sembilan and Johor would suggest that it will have plenty of opportunities to build its industrial portfolio.
