Sime Darby Property up 5% in active trade on household rooftop solar initiative

• In terms of volume, the counter saw 7.68 million shares change hands. This exceeded its 200-day average volume of 3.50 million shares in morning trade.
• Year-to-date, its share price has increased by 36.67%, and its one-year shares have risen by 33.83%, according to Bloomberg data.

KUALA LUMPUR (July 31): Sime Darby Property Bhd saw its counter rise to its highest since March 2022, and was actively traded on Monday morning (July 31).

At the time of writing, its share price had risen three sen or 5.13% to a high of 61.5 sen, against its last closing price of 58.5 sen last Friday. Its market capitalisation was RM4.15 billion.

Its share price was at the highest since more than a year ago on March 2, 2022 at 61 sen.

In terms of volume, the counter saw 7.68 million shares change hands. This exceeded its 200-day average volume of 3.50 million shares in morning trade.

Year-to-date, its share price has increased by 36.67%, and its one-year shares have risen by 33.83%, according to Bloomberg data.

Last Thursday, Economy Minister Mohd Rafizi Ramli said during the launch of the National Energy Transition Roadmap that the property developer had committed to the installation of 4.5MW solar capacity across 450 homes as a start with up to 10kW capacity per house as part of its household rooftop solar initiative.

RHB Research maintains 'buy' with higher TP of 67 sen.

RHB Research has maintained its “buy” call on the property developer, with a higher target price (TP), even though the project will unlikely have a significant impact on near-term earnings.

Analyst Loong Kok Wen said the new TP is 67 sen (from 55 sen), with a 14% upside and about 3% yield. The TP is based on a 70% discount to revised net asset value from 75%, and a 4% environmental, social and governance (ESG) premium after it raised the developer’s ESG score to 3.2, from 3.1.

“We like the management’s effort to enhance utilisation of its non-core land bank that has limited development opportunities, which would otherwise be left vacant for years,” said Loong in a research note on Monday.

In addition to the housing solar project, Sime Darby Property also announced the commissioning of utility-scale ground mounted solar farms in Jerai, Kedah with 365 acres (147.71 hectares) and Pagoh, Johor (635 acres), with a potential capacity of 330MW.

“The offtakers will be the industrial, commercial, and retail users across Sime Darby Property’s townships. The management has indicated that Sime Darby Property could be the generator, distributor, and offtaker of solar energy,” said Loong.

She added that despite the rising trend of renewable energy globally, only developers with large land bank, especially with land plots in remote areas without near-term development opportunities, are able to take part in solar power generation.

“These are typically the government-linked investment company developers, and Sime Darby Property is one of them.

“Other developers, with limited non-core land, will probably not get involved, given limited land resources.”

She noted that Sime Darby Property’s venture into renewable energy makes sense, as the developer has about 6,600 acres of non-core land, out of the 19,000 acres of land bank in its portfolio.

“The company has no development plans over the near to medium term on its non-core land, therefore solar farming will be a good alternative for a more efficient use of land.”

“It will also help to kick-start developments of greener townships, where townships are generators and offtakers of solar energy.”

She added as an example the solar farm in Pagoh is expected to supply power to its future industrial park in Bandar Universiti Pagoh (BUP), and intends to transform and integrate BUP with an energy-efficient industrial zone.

Loong also said that the developer will seek funding for solar farming capital expenditure from a few strategic investors.

“Debt financing should also be viable, as more commercial banks are offering green financing in Malaysia at a slightly cheaper interest rate.”

Last Friday, CGS-CIMB also maintained its "add" rating of 59 sen for Sime Darby Property, with an unchanged TP of 73 sen.