KUALA LUMPUR (July 16): It is an opportune time to pick Sime Darby Property Bhd (KL:SIMEPROP) given the recent pullback in its share price, said Maybank Investment Bank.
"We upgrade Sime Darby Property to 'buy' given the recent weakness in its share price, with the total return now exceeding 10%, " the house said in a note on Thursday.
The house has assigned a target price of RM1.51 to the stock, implying a 12% upside to its current price of RM1.35.
Meanwhile, Maybank IB is positive on Sime Darby Property's 50:50 joint venture (JV) with SD Guthrie Bhd (KL:SDG) to develop 1021.9 acres of land in Jeram into an integrated industrial park.
The park, located along the WCE-ECRL logistics corridor near Port Klang, is expected to benefit the group in terms of rising industrial and logistics demand, supply chain diversification and high-value manufacturing investments.
The acquisition will be undertaken via Kerayong Development Consortium Sdn Bhd, the JV, with Sime Darby Property committing up to RM100 million through equity and shareholder advances, while the balance will be funded by external borrowings.
Sime Darby Property and SD Guthrie will each appoint two representatives to the JV's board. The land acquisition is expected to be completed by the second half of the year.
“We estimate the project's gross development value (GDV) at RM3 billion to RM5 billion, which could enhance our revalued net asset value to RM2.53-RM2.54 (from RM2.52), based on Sime Darby Property's 50% stake”, the house said.
Sime Darby Property is one of the largest developers in Malaysia, with total remaining land bank of 12,596 acres. The bulk of its land is within the Klang Valley, the main property market in Malaysia, and constitutes 72% of Sime Darby Property’s GDV.
Maybank IB said downside risks could include higher raw material costs and labour shortages that may affect construction operations, along with slower-than-expected property sales.