This article first appeared in The Edge Financial Daily on March 1, 2019 - March 7, 2019

KUALA LUMPUR: Sime Darby Property Bhd, which posted its maiden loss-making quarter on Wednesday, expects to return to the black for the first quarter ending March 31 this year (1QFY19), on resilient demand and gain from disposals.

Following that, FY19 is anticipated to be “satisfactory”, according to its group managing director Datuk Seri Amrin Awaluddin. The group has changed its financial year end from June 30 to Dec 31, hence FY19 starts from this quarter.

Amrin said the group recently completed the disposal of Darby Park Executive Suites in Singapore for S$93 million, from which it registered a gain of S$67.3 million (RM204.3 million) that will be accounted for in the current quarter.

“[The] market is soft and it will take time to adjust, though the question remains as to how long till it recovers. Because of that, we had to take a prudent stand to address our challenges,” said Amrin yesterday during a briefing on the group’s results for the six months ended Dec 31, 2018.

He was referring to the high impairment of inventories the group had recorded that impacted the 2Q ended Dec 31, 2018, causing a net loss of RM347.5 million against a net profit of RM138.08 million a year ago.

Notwithstanding a 12.1% rise in revenue to RM788.81 million, the 2Q was also weighed by a negative contribution from the Battersea project, higher tax provision and the absence of disposal gains.

Consequently, for the six months ended Dec 31, 2018, it recorded a net loss of RM318.7 million against a net profit of RM559.77 million for the preceding year, despite revenue growing 7.9% to RM1.27 billion from RM1.18 billion.

“Having addressed our legacy assets and products, we expect an immediate return to profitability as operationally, our performance has been positive. Our launches during the period were well-received and we expect this to continue into the first half of 2019,” Amrin said.

Moving forward, Amrin said the group will continue with efforts to reduce and monetise non-core assets as well as to focus on launching mainly landed properties within the affordable to medium price range of RM500,000 to RM800,000 in its Bandar Bukit Raja, Elmina and Serenia townships.

It is also targeting RM2.3 billion in sales for FY19, which it is confident of achieving after surpassing the RM1 billion target it set for the six months ended Dec 31 with RM1.34 billion in sales. The group currently has unbilled sales of RM2 billion.

While the group’s main focus is to launch residential properties, Amrin said the medium- to long-term plan is to expand into more industrial, logistic and commercial projects to increase recurring income. “We target that by 2020, 10% of pre-tax profits will come from recurring income, which is rental and property investment,” he added.