Sime Darby Property foresees margin compression on higher raw materials costs

by S BIRRUNTHA / pic by TMR FILE 

SIME Darby Property Bhd expects to see margin compression in the financial year 2022 (FY22) due to rising raw material prices.

Its COO for integrated development Datuk Mohd Idris Abdullah said the developer will implement mitigation efforts which include looking at design and alternative materials that can give better results in terms of cost management for all of the group’s products.

He added that the group is looking at speeding up constructions and different designs on how to overcome the issue.

“It is a challenge to us but at least we know upfront that material prices are volatile.

“We are working on the constraints and we are working with the design engineers and contractors to see how best we can do it efficiently to ensure we are within our design-to-cost threshold.

“That will ensure we do not compromise our margins,” he said during a virtual media briefing on Sime Darby Property’s fourth quarter ended Dec 31, 2021 (4Q21) last Friday.

Sime Darby Property group MD Datuk Azmir Merican said the group will continue the positive momentum from last year with strategic new launches worth RM2.8 billion in gross development value (GDV) planned for FY22.

He said the group is aiming for a RM2.6 billion sales target for FY22, and believes it is going to have a good year in terms of sales.

“We are overall positive on the year. However, we will continue to monitor the development especially in the first half or especially in the first quarter because the home ownership campaign has ended.

“So, buyers may wait and see for a little longer to see how Omicron can impact the market.

“But the fact that we are not having a Covid-19 lockdown and the government has been dealing with it rather well gives us confidence it should not be too disruptive,” he said.

Azmir said for 1Q22, the group will launch new residential landed products with a GDV worth RM571 million in the City of Elmina, Bandar Bukit Raja, Serenia City, Bandar Ainsdale, Nilai Impian and KL East; and high-rise products with a GDV worth RM156 million in Putra Heights.

He added that Sime Darby Property’s strategic initiatives implemented since last year will catalyse its growth into a real estate company.

“Through our investment and asset management segment, we have introduced the industrial development fund in partnership with LOGOS Property Group Ltd, targeted to make its maiden contribution in the second half of FY22, as well as focus on expanding our retail and place-making components in our flagship townships.

“We are optimistic of the growth opportunities in this sector that will broaden the group’s recurring income streams for the long term,” he noted.

Sime Darby Property saw a turnaround in the 4Q21 with a net profit of RM72.19 million compared to a net loss of RM56.64 million a year earlier upon resumption of site progress in the group’s property development segment as Covid-19 pandemic-driven movement restrictions eased.

Revenue for the quarter grew to RM739.37 million from RM705.19 million in 4Q20.

The group registered earnings per share of 1.1 sen for the period against a loss per share of 0.80 sen previously.

For FY21, the property developer reported a net profit of RM136.9 million compared to a net loss of RM501.57 million in FY20, while revenue was up at RM2.22 billion from RM2.06 billion in FY20.

According to the group’s filing to Bursa Malaysia last week, Sime Darby Property achieved RM1 billion in new property sales and strong progress billings in the 4Q21.

The group also recorded an impressive RM3 billion in sales for FY21, exceeding its FY21 sales target of RM2.4 billion and a significant 50% year-on-year increase from the previous year.

Azmir said the group’s successful sales and financial achievements resulted from the company’s focus on growth and cost discipline throughout FY21.

He said the group was mindful of the challenges presented by the Covid-19 pandemic last year and focused on minimising disruptions to its business, allowing customers to continue engaging with its sales and customer service representatives.

“A fully redesigned homebuying experience complemented our strategic launches across the group’s master planned townships, bringing homes, lifestyle and commerce together.

“We thank our customers and all stakeholders as we look ahead and continue to adapt with market conditions to deliver value through our quality products in FY22 and beyond,” he added.

The company will continue to be guided by its corporate priorities in growing its business in 2022.

The priorities include broadening the group’s recurring income streams; deepening competencies to improve resilience and market offerings; enhancing key enablers including digitalisation, innovation and sustainability to disrupt operations positively; and developing new capabilities that synergise with its business expansion plans.

The group said these priorities are in place for Sime Darby Property to evolve from a pure-play developer to a real estate company.

“Our initiatives this year will include strategic launches across landed, high-rise and the industrial & logistics development segments, a tactical landbank monetisation programme, and introduce more recurring income streams.

“The group will further embed sustainability principles in its businesses, as well as pilot new technology and innovation features that will complement our businesses, namely in-home design and place-making,” it noted.

As at Dec 31, 2021, Sime Darby Property’s resilience is buoyed by a moderate net gearing ratio of 0.32 times and unbilled sales of RM2.4 billion.

The group’s total bookings as at Feb 6, 2022 stood at RM2.1 billion.