SIMEPROP: Property Developer Surpasses Profit Expectations on Strong Margins and Sales Growth
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A prominent property developer has reported robust financial results for the nine months ended 30 September 2025 (9M25), with core net profit reaching RM444.8 million. This performance significantly outpaced consensus estimates by 80% and aligned well with the investment bank’s own expectations, tracking 76% of its full-year forecast.
Performance Review
While 9M25 revenue saw a slight year-on-year decrease of 3.9% to RM3.1 billion, primarily attributed to slower property development earnings as industrial projects were in early construction phases compared to strong industrial and land sales in the prior year, the company demonstrated strong sequential growth. Quarter-on-quarter, revenue surged by 14% to RM1.2 billion, and core net profit climbed 31% to RM186.7 million. This improvement was largely driven by an expansion in gross margin, which reached 33.8% (up from 32.9% in 9M24) and exceeded management’s target range of 20-25%. Additionally, a turnaround in the investment and asset management segment, coupled with narrower losses from joint ventures and the leisure segment, contributed to the stronger profitability.
Sales and Order Book
New property sales showed significant momentum, jumping 32% year-on-year and 24% quarter-on-quarter to RM1.4 billion. This brought total 9M25 sales to RM3.4 billion, representing 93% of the group’s full-year target and marking a 7% year-on-year increase. Industrial products were a key driver, contributing 38% of total sales. The group’s unbilled sales also reached RM4.1 billion, the highest level since its demerger in 2017, providing strong earnings visibility. However, take-up rates for industrial launches were relatively modest at 41%, reflecting their recent introduction in the second and third quarters and their early sales cycle.
Future Outlook
Looking ahead, the developer is poised for continued growth. Secured bookings of approximately RM1.5 billion point to encouraging sales prospects for the fourth quarter, complemented by plans to launch new projects with a combined Gross Development Value (GDV) of RM1.5 billion. Analysts anticipate additional 4Q sales between RM900 million and RM1.0 billion, which could push FY25 sales to RM4.3-RM4.4 billion, potentially marking the eighth consecutive year of surpassing sales targets.
The balance sheet remains robust with a net gearing of 34%, well within management’s threshold of 50%, despite an increase attributed to funding growth initiatives such as investment capital for data centre projects and land acquisitions. The recurring income portfolio is also strengthening, with KLGCC Mall achieving 90% occupancy ahead of its October opening, and both Elmina Lakeside Mall and KL East Mall fully occupied. In the industrial segment, Metrohub I is fully leased, Metrohub 2 is 90% occupied, and Metrohub 3 is under construction. Two hyperscale data centre leases at Elmina Business Park, valued at RM7.6 billion over 20 years, further bolster the long-term outlook.
Valuation and Recommendation
TA Securities maintains a recommendation on the stock, with a target price of RM0.25, reflecting an upside of 25.0% from the last traded price of RM0.20. The recommendation is supported by strong earnings, robust sales, and a healthy pipeline of future developments.
