On the right track
Concall note
Key updates from SDPR’s concall last Friday: 1) latest status of Battersea Power Station (BPS) project, 2) its future strategies on land-banking and 3) SDPR is looking to monetise all of its non-core land (?2,300 acres worth MYR3b) by 2025. We maintain our earnings forecasts and MYR0.69 TP (on an unchanged 0.5x PBV). Reiterate HOLD.
Update on Battersea Power Station Phase 2 and 3A
The concall centered mostly on its FY21 results and future strategies. To recap, SDPR reported MYR136.9m core net profit (1.7x YoY) and impressive sales of MYR2.95b (+49% YoY) in 2021. It sets a lower sales target of MYR2.6b in 2022 (see our report dated 25 Feb). Elsewhere, its 40%-owned BPS (the remaining 40% and 20% are owned by SP Setia and EPF)’ phase 2 and phase 3A, which have recorded GBP404m sales in 2021, are targeted to be officially opened in Sep 22. Thus far, the commercial spaces are 84% leased. Elsewhere, the consortium is looking to launch Phase 3B residential in 2H2022.
Looking to acquire more land
Management is exploring the land option agreements with Sime Darby Plantation (11,805 acres; SDPL; HOLD; MYR4.78 TP) and Sime Darby Bhd (8,036 acres; SIME MK; BUY; MYR2.70TP). This is to replenish and
capitalize on activation of new townships following the pace of development and orderly monetization undertaken by SDPR. It may exercise or extend some of these call options, we were told. To recap, SDPR has exercised its first right of refusal to acquire 760.1 acres of agricultural land in Labu for MYR280m (or MYR8.46psf) from SIME.
Expanding its recurring income
Management is looking to transforming itself into real estate company (from pure play developer) by 2025 with 70:30 of its operating income derived from its property development: recurring income. We maintain our earnings forecasts. SDPR currently trades at 0.5x/0.3x PBV/PRNAV. Surprises could come from the disposal of non-core landbank (2021: >200 acres disposed). It is targeting to monetise all of its non-core landbank (?2300 acres) worth MYR3b by 2025.