City of Elmina by Sime Darby Property. Image source: thestar.com.my
Sime Darby Property Berhad (“Sime Darby Property” or “the Company”) released its first quarter results today which saw the Company registering a revenue of RM476.7 million and profit after tax and minority interests (“PATAMI”) of RM14.2 million for the quarter under review.
First Quarter Period Review
The Company’s revenue during the quarter continued to be driven by contribution from its Property Development segment, which recorded a revenue of RM440.7 million and constituted 92.4% of the total revenue. This was mainly derived from the City of Elmina and Bandar Bukit Raja townships as well as land sale.
For the quarter under review, the Company launched 583 units in its flagship township - Elmina East, which comprises 513 units of landed linked homes priced from RM578,000 onwards and 70 units of 2-storey and 3-storey commercial shops priced from RM1.39 million onwards. The Company has witnessed positive responses from prospective buyers where the take-up rates were encouraging.
Additionally, other development projects such as the Elmina West, Subang Jaya City Centre, Ara Damansara and Nilai Utama township performed better in the current quarter compared to the corresponding period during the previous year.
The segment recorded a decline in the current quarter’s property sales of both landed and high-rise units compared to the corresponding period of the previous year. This is mainly arising from weak consumer sentiment and the expiration of the Home Ownership Campaign (“HOC”) on 31 December 2019. On-site construction activities were halted for 14 days in the current quarter, resulting in delays in the delivery of projects. For the Property Development segment, the Company has made a provision of RM10.8 million for, among others, liquidated and ascertained damages. The corresponding period of the previous year also recorded a one-off gain totalling RM203.4 million from the disposal of Darby Park Executive Suites in Singapore.
Total unbilled sales for the Property Development segment stood at RM1.5 billion as at 31 March 2020. Total bookings of RM912 million have been secured and the Company remains focused on converting it into signed sales and will continue driving new leads.
Way Forward and Outlook
Bank Negara Malaysia has revised Malaysia’s Gross Domestic Product (GDP) projection to between -2.0% and 0.5% in 2020, weighed down by the output loss arising from the pandemic, Movement Control Order (“MCO”) and the collapse in petroleum price. The already weakened domestic property market prior to COVID-19 would continue to be affected by the ensuing global uncertainties and external developments. However, the impact on the property sector may be partially cushioned by the massive fiscal stimulus amounting to 2% of GDP and the reduction of the Overnight Policy Rate for the third time this year by 50 basis points, bringing the benchmark interest rate to 2.0%. These policy actions are expected to support domestic economic activities.
The Company’s immediate priorities for the year will be on cash flow management, active marketing and sales campaigns, inventory management, and cost reduction. Emphasis will be placed on key projects that deliver value to the stakeholders and the Company will focus on launching products that are priced competitively to meet customers’ needs.
In line with the Government’s incremental lifting of the MCO, the Company is in the midst of commencing construction works. Construction sites will be activated in phases, in compliance with relevant regulatory requirements. Strict operating guidelines including the social distancing etiquette have been adopted to ensure seamless operations. As a leading industry player, Sime Darby Property will work in tandem with the Ministry of Housing & Local Government as well as other relevant agencies on industry matters, including the securing of Extension of Time (EOT) for the handover of ongoing projects.
“Moving forward, the Company will streamline its efforts to promote the right product launches as well as improve on processes and systems. This would enable us to become more agile and adaptable to respond to the fast-paced challenges of these current times,” said Group Managing Director Dato’ Azmir Merican.
He further added, “We will also prioritise our areas of focus to what will make a difference for 2020, in particular strengthening our resilience against the global and domestic macroeconomic headwinds and the market uncertainties brought by the pandemic, which is unprecedented in its magnitude”.
The Company foresees that the coming months in the current financial year will be adversely affected by the spillover effects of the pandemic on consumers’ purchasing power thereby resulting in a moderation of property sales.
In weathering the storm, the Company remains confident in its financial position, as reflected by its strong track record and a robust balance sheet. As at 31 March 2020, unbilled sales in hand remained at a healthy RM1.5 billion, coupled with a targeted pipeline of new launches.
(21 May 2020)
