[MARC] MARC Ratings affirms AA+IS rating on Sime Darby Property’s Sukuk Musharakah Programme

MARC Ratings has affirmed its rating on Sime Darby Property Berhad’s (SD Property) RM4.5 billion Islamic Medium-Term Notes (IMTN) Programme (Sukuk Musharakah) at AA+IS with a stable outlook. The outstanding under the rated programme stood at RM1.4 billion as at November 30, 2024.

The rating continues to reflect SD Property’s strong sales track record from its established townships and its strong balance sheet characterised by low leverage. The rating benefits from a one-notch uplift on implicit support from majority shareholder Permodalan Nasional Berhad which holds a 52% stake in the property developer.

SD Property launched developments worth RM2.8 billion in gross development value in 9M2024, about half of which are accounted for by industrial offerings, and the remainder being primarily residential high-rise and residential landed products. Overall take-up rate was strong at around 76%, underlining strong demand for its various products that are located within and near populous areas with well-established connectivity. SD Property’s considerable developable landbank (excluding non-core lands) of about 12,900 acres, largely within its existing townships, would continue to provide opportunities for developmental expansion that include industrial developments. Unbilled sales of RM3.7 billion provide strong earnings visibility over the next three years. Completed inventories which stood at RM185.5 million as at end-September 2024, remain modest relative to the size of SD Property’s projects.

SD Property continues to undertake initiatives to be a sustainable real estate player with broader presence in property development, property investment, and asset management. Among these is the group’s increased built-to-lease industrial and logistics property offerings that would further strengthen recurring income going forward.

SD Property’s sole overseas project in which it has a 40% stake is the seven-phase Battersea Power Station in London, United Kingdom. The project’s Phase 3B residential component comprising a 204-unit apartment building was completed in December 2023 and has achieved 61% sales as at end-September 2024. The commercial component comprising an office building known as 50 Electric Boulevard was completed in April 2024, and has recorded an occupancy rate of around 45%; negotiations with potential tenants are ongoing.

For 9M2024, revenue increased by 35.0% y-o-y to RM3.3 billion, driven by improved sales and site progress of SD Property’s various products primarily within its townships in the Klang Valley; this includes RM96 million worth of non-core land parcel sales. Higher profit from an enlarged property development revenue base has offset the impact from a provision made by its Battersea Power Station joint-venture company for the five-year rental guarantee granted to the purchaser of the 50 Electric Boulevard Grade A office building. Pre-tax profit rose to RM636.8 million (9M2023: RM440.7 million). Total borrowings reduced slightly to RM2.8 billion (end-2023: RM2.9 billion) with the debt-to-equity ratio standing at a low 0.27x. Liquidity position, as reflected by cash balances of RM790.7 million, remains healthy.

Umar Abdul Aziz, +603-2717 2962/ umar@marc.com.my
Cyndy Goh, +603-2717 2941/ cyndy@marc.com.my
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my