SIMEPROP: Strategic Portfolio Shift and Pipeline Growth Underpin Positive Outlook

A leading investment bank maintains a positive outlook on a key property player, reaffirming its “BUY” recommendation. This positive sentiment is driven by robust strategic shifts and strong pipeline execution, despite near-term adjustments to earnings forecasts that reflect a deliberate pivot towards recurring income streams.

Strategic Reorientation Drives Long-Term Value

The investment bank remains optimistic, highlighting management’s strategic focus on expanding its investment asset portfolio, complementing its solid property development segment. Earnings forecasts for FY25-27F have been trimmed by 15%, 4%, and 5% respectively. This adjustment is primarily due to a strategic decision to hold back approximately MYR150-200m worth of industrial products, which are now designated for development into proprietary investment properties. These will generate rental income over the next 2-3 years.

This initiative is a core component of the SHIFT25 transformation programme, aiming to establish the company as a true real estate player with a significant asset base. A potential REIT-listing for this industrial portfolio is seen as a strong value-accretive move, expected to be well-received given the high quality of the underlying assets.

Robust Project Execution and Future Growth

Execution on the second data centre (DC) project is reportedly on track, with delivery anticipated by end-2027. While funding details are still being finalised, the model is expected to mirror the successful Industrial Development Fund (IDF) structure used for logistics warehouses. Concurrently, the pipeline for new investment properties is robust. The KLGCC mall, with an impressive 85% committed occupancy, is slated to open in October 2025.

Additionally, progress continues on three new logistics warehouses in Bandar Bukit Raja. Metrohub 1 and 2 have already achieved 100% and 88% occupancy rates respectively, with construction for the third warehouse already underway. These developments, providing a combined 2m sqf NLA, are poised to significantly enhance the company’s recurring income base.

Investment Outlook Remains Strong

The investment bank reiterates its “BUY” rating, underpinned by management’s long-term vision to grow the company’s asset base. The unchanged target price, which includes a 4% ESG premium and is based on a 25% discount to RNAV, reflects confidence in this strategy. Asset monetisation is identified as a key catalyst for share price appreciation.