Sime Darby Property eyes industrial logistic partnerships


Sime Darby Property Bhd (SD Property) aims for more strategic partnerships involving industrial logistics development to increase the group’s recurring income in the longer term.

Group MD Datuk Seri Amrin Awaluddin said SD Property’s earning base can be enhanced with the development of industrial and logistic properties following its partnership with Japan’s Mitsui & Co Ltd and Mitsubishi Estate Co Ltd.

“The group will actively look into more strategic partnerships which will serve as catalytic development for its townships, diversification beyond traditional products and increasing its recurring income,” he told reporters during the group’s financial results media briefing yesterday.

Amrin said the developer is currently partnering Mitsui and Mitsubishi Estate to develop a managed industrial park with a gross development value of RM530 million at the Bandar Bukit Raja township in Klang, Selangor.

“It will allow us to monetise and develop our township and also creates an asset for rental income for the long term.

“So, this would be our medium- to long-term strategy — we are expanding our revenue source from purely residential and property sales, into revenue generation,” said Amrin.

As a mature property company, he said SD Property should have a revenue sources portfolio.

“We have set a target that by 2020, 10% of our pretax profits will be from recurring income, which is from rental and property investment,” he said.

The group is also expected to be profitable in the first quarter ended March 31, 2019 (1Q19), mainly due to disposal of its Darby Park Executive Suites in Singapore.

“The disposal was completed on Jan 31, so that is going to be the main contributor for our 1Q19 results,” Amrin said.

Earlier this year, the group completed the disposal of Darby Park Executive Suites, one of its hospitality assets in Singapore.

The sale was completed for a consideration of S$93 million (RM280.4 million) and the group registered a gain on disposal of S$67.3 million, according to its filing to the local bourse.

Amrin also said the developer had signed an agreement for the sale of its 121.41ha of land in Kedah to Zhejiang XSD Holding Group Co Ltd for RM88.9 million last November.

“The transaction is expected to be completed in 2Q19.

“SD Property will continue with the disposal of non-core assets to put its capital to better use,” he added.

Additionally, SD Property will commence operations of its new mall, Galleria KL East in 4Q19, to support the growth of its recurring income.

On the impact of stamp duty exemption announced in Budget 2019, Amrin believes it is still too early to tell, but the launch of the National Homeownership Campaign will provide an indicator on the overall market sentiment. SD Property currently has a total landbank of 8,903ha.

The company has no plans to increase its landbank, according to Amrin.

On the outlook for its financial year ending Dec 31, 2019 (FY19), SD Property expects to achieve satisfactory results, while taking into account the slowing property market.

“Apart from the continuing efforts to reduce inventories, we will continue to launch properties within the affordable to medium price range of RM500,000 to RM800,000. “The group has also targeted unbilled sales of RM2 billion for the year,” Amrin said.

For the full year under review, the group’s property development segment registered a higher revenue of 9.4%, but the segment results declined by 96.7%.

The results were adversely impacted by the impairment of completed inventories and write-off of development expenditure for two projects, where launches have been deferred, of RM110.8 million and RM99.8 million respectively.

For the six-month period ended Dec 31, 2018, SD Property’s share loss from the Battersea Power Station project was RM7.7 million compared to a profit of RM112.1 million recorded in the previous year.

The property investment segment registered a profit of RM11.5 million compared to a loss of RM5.6 million recorded the previous year.

Amrin said it was mainly due to the commencement of a tenancy of an investment property and the gains on disposal of investment properties in the UK worth RM5.6 million.

“The better performance was also contributed by lower share loss of Sime Darby CapitaLand (Melawati Mall) Sdn Bhd’s loss of RM1.1 million compared to the share loss of RM7.9 million a year ago.

“The mall recorded an improved occupancy rate of 85% (December 2017: 70%) since its opening in July 2017,” he said.