• Net profit above our expectations bolstered by divestment gain of London asset
• JV projects Indonesia Convention Exhibition and AEON Mall BSD City to commence operations in 2015, augmenting the recurring income
• Looking to expand footprint in China with the wavier of existing undertakings between the company and Bund Center Investment Ltd
• A final dividend of 0.5 cents per share declared
• Maintain BUY with unchanged TP$0.96

What is the news?

FY14 revenue down 29.7% to S$828.6mn due to absence of $302mn land parcel sales. Excluding the land parcels sales, the revenue decreased marginally due to lower contributions from less completed residential units in Indonesia and China’s development reaching its tail-end.

Disposal of New Brook Buildings for a consideration price of S$233.7mn completed in 4Q14, recording a gain of $71mn for the year.

As such, net profit was reported at S$240mn (-16.7% yoy), smaller quantum drop than the top-line.

The proposed wavier of the existing mutual undertakings between Sinarmas Land (SML) and Bund Center Investment Limited was approved at the Extraordinary General Meeting held in Nov 14. With that, SML will be on a look out for investment opportunities for development projects in China to diversify the revenue income stream.

How do we view this?

Sustainable earnings from Indonesia residential sales – Bumi Serpong Damai (BSD) has achieved IDR 6.5 tn (S$682mn) in marketing sales last year, slightly higher than its initial target of IDR 6 tn. For this year, BSD is targeting a modest growth of 15% to IDR 7.5 tn (S$788mn) in marketing sales. The growth in middle-income segment, infrastructure developments and recent benchmark interest rate cut of 25 bps to 7.5% will sustain the demand for residential sales. We reckon that SML may launch more high-rise housing projects with the increasing demand for apartments.

Investment Actions

Though the share price has risen 33% for the past few weeks, the strong company fundamentals justify for further upside in the share price. We favour SML for its buoyant sales performance, deep development pipeline and positive operating cash flows to strengthen the balance sheet. Maintain BUY with unchanged TP$0.96.

Source: Phillip Securities Research - 3 Mar 2015