Sime Darby Prop eyes up to 10% recurring income contribution

KUALA LUMPUR (Aug 29): Sime Darby Property Bhd (SDP) is targeting its recurring income segment to contribute up to 10% from its profit before interest and tax (PBIT) by 2022 or 2023 as part of the group’s strategic pillars to grow the recurring income, according to group chief financial officer Datuk Tong Poh Keow.

“We have kickstarted this with the industrial park that we did with Mitsui, [so now] we are looking at some other industrial parks with big players. Pagoh Education Hub comes in very well because it has already matured with one full year of operation,” she told reporters yesterday after releasing the group’s earnings results for fourth quarter ended June 30, 2018 (4QFY18).

Tong was referring to the company’s joint-venture with Japan’s Mitsui & Co Ltd and Mitsubishi Estate Co Ltd to develop an industrial park in the Bandar Bukit Raja township in Klang, Selangor. Besides that, part of its recurring income stream is from the 204.77ha Pagoh Education Hub in Bandar Universiti Pagoh, which contains four institutions of higher education — Universiti Tun Hussein Onn Malaysia, Universiti Islam Antarabangsa Malaysia, Universiti Teknologi Malaysia and Politeknik Tun Syed Nasir.

During financial year 2018 (FY18), recurring income contributed RM66 million or 9% to pre-tax profit profit, out of the total of RM728.38 million.

In 4QFY18, its net profit plunged 85.8% to RM46.57 from RM327.66 million in the same quarter last year, mainly due to lower contributions from property development activities.

The property development segment reported a profit of RM20.7 million during the quarter compared to RM274.4 million in 4QFY17. The decrease in net profit was also contributed by the share of losses from its Battersea project of RM8.8 million and the fact that previous year’s results included the gain on disposal of Glengowrie Estate of RM209 million.

Quarterly revenue fell 45.8% to RM617.36 million from RM1.139 billion in 4QFY17.

The board of directors has declared a second interim single-tier dividend of three sen per share payable on Oct 26.

For the full FY18, the group’s net profit remained flattish at RM640.01 million against RM624.03 million last year despite the 9.9% decline in revenue to RM2.353 billion from RM2.611 billion.

SDP has announced the proposed change of its financial year-end to Dec 31 from June 30 currently.

As such, the next financial year will be for the six-month period ending Dec 31, 2018.

During the six-month period, the group aims to launch about 1,500 units of properties with a combined gross development value of approximately RM1.1 billion.

Group managing director Datuk Seri Amrin Awaluddin said although the removal of goods and services tax has lifted consumer sentiment, buyers appear to be adopting a wait-and-see attitude ahead of other major government announcements such as the reintroduction of the sales and services tax and the new national housing policy which is slated to be unveiled in September.

“We will stick to our focus of launching affordable and medium-range landed properties at townships such as Serenia City, Bandar Bukit Raja, Nilai Impian and the City of Elmina where demand for these properties is strong,” he said.

Meanwhile, Tong said the company has been approached by potential investors to develop the RM290 billion Malaysian Vision Valley project in Negeri Sembilan, and was engaging with the federal and state governments, as well as, local stakeholders on its development.

The 153,375ha project has come under scrutiny after the government decided to review the Kuala Lumpur-Singapore High-Speed Rail project.

The project was to be developed jointly by SDP, Retirement Fund Inc (Kumpulan Wang Persaraan [Diperbadankan]) and Brunsfield Development Sdn Bhd.

Tong said the company was looking to expand its existing land bank which currently stood at 8,093.7ha.

She said the company was also looking to dispose of some of its land especially in Kedah to local developers.

The group is also looking to dispose of its hospitality segment in Australia and Vietnam as operating expenditure exceeded the returns which were low.

This article first appeared in The Edge Financial Daily, on Aug 29, 2018.

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