KUALA LUMPUR (May 26): Sime Darby Property Bhd (KL:SIMEPROP) will reassess its RM4 billion sales target in its upcoming mid-year review, as rising construction costs and cautious consumer sentiment squeeze margins and affordability.
Group managing director and chief executive officer Datuk Seri Azmir Merican said the developer is maintaining its 2026 sales target for now, though management recognises the growing challenges ahead.
"I want to be pragmatic and transparent. As we enter our mid-year review cycle, I will gather feedback from the senior [management] team. Typically, any revision would be made when we announce our second-quarter results, but as of today, we still hope to pursue the RM4 billion sales target," he said during the group's first-quarter results media briefing on Tuesday.
The group recorded RM918.9 million sales for the first quarter ended March 31, 2026 (1QFY2026), representing 23% of its RM4 billion annual target.
Industrial products were the largest contributor, contributing RM487 million or 53% of total sales, followed by residential landed properties at RM219.7 million, residential high-rise projects at RM157.6 million, and commercial products at RM52.6 million.
Unbilled sales stood at RM4.1 billion as at March 31, providing earnings and cash flow visibility for the next three years.
Sime Darby Property, which exceeded its RM4 billion sales mark in FY2025 for the second consecutive year, has planned launches with an estimated gross development value of RM4.7 billion across domestic and international markets for FY2026.
The group is also reviewing pricing and product designs for its upcoming launches to balance affordability with profitability, while acknowledging that cost pressures have intensified across the construction sector.
“For the projects we have launched, we are unable to pass the cost [to customers],” Azmir said. “For projects that we are launching, we are doing a couple of things. One is to look at the price and rationalise the design, so we can retain healthy margins and at the same time continue to launch the product at a sensible and attractive price,” he added.
Contractors are increasingly seeking compensation for higher costs due to volatile fuel prices, rising building material costs, and ongoing supply chain disruptions linked to geopolitical developments, he said.
Diesel prices, which are heavily used in construction and logistics activities, had risen sharply over recent months, adding pressure on project costs, he said.
"Most contractors have written to us to highlight the additional costs they have incurred, and we are currently in the middle of negotiations," he said. "As you know, our contracts are fixed-fee, but being practical, we know that we have to also be responsible as developers. For future projects, this is where we need to look at costing again,” he added.
Shares of Sime Darby Property fell three sen or 2.05% to close at RM1.43 on Tuesday, giving the group a market capitalisation of RM9.73 billion. The stock is up 2.14% this year.