1.

0 Introduction

Land Banking is a process of reserves and invested on land for higher return anticipation. Land
bank is also a process where speculating for higher land price in real estate market which
exceed the cost of that land acquisition. This is a strategic from developer to keep the land and
develop it when the suitable time. Usually property developer will buy land for the purpose
land bank, in which during the acquisition the lands potential yet increased. Land as stock for
which its uses are yet to determine.

The reason we choose Sime Darby Bhd as our research for land bank because they are the
developer company with largest land bank in Malaysia. Besides that, Sime Darby also has
various market sector such as plantation and property development.

2.0 About Sime Darby BHD

Sime Darby is one of the leading property developer in Malaysia, its core businesses are
property development and property investment. Sime Darby is a diversified multinational and
a key player in the Malaysian economy, with businesses in key growth sectors, namely,
plantation, industrial equipment, motors, property and logistics, with operations in 26 countries
and 4 territories. Committed to developing a sustainable future, Sime Darby strives to maintain
an equitable balance between increasing value for shareholders and responsible development
that brings value to society and safeguards the environment. Sime Darby is one of the largest
companies listed on Bursa Malaysia and has a market capitalisation of RM48.02 billion
(USD11.74 billion) as at 30 June 2016.

Sime Darby is with various portfolio such as plantation, property, motor, industrial and logistic.
Sime Darby have established market positions in key growth sectors namely plantation,
industrial equipment, motors, property and logistics. The biggest profit contribution is from
plantation with 34% and property with 35%. Sime Darby is a premier community developer
involved in property development, property investment and asset management. Currently Sime
Darby are Malaysias largest property developer in terms of land bank and active developments.
In 2012, Sime Darby ventured into the international property market via their 40% stake in the
Battersea Power Station project in the United Kingdom together with SP Setia Bhd and
Emplyees Provident Fund (EPF).

The Industrial Division undertook strategic rightsizing, continued cost cutting measures,
sustained a disciplined approach towards working capital management and worked towards
identifying new businesses such as the Mine Energy Solutions partnership. The Motors
Division focused on resource optimisation, as well as venturing into new markets, securing
new marques and increasing footprint strategically. Sime Darby Property business looked into
further enhancing the value of its land bank and strengthening the position of its brand, while
the Logistics Division expedited the expansion of its ports with strategic partners.

3.0 Sime Darby from Year 2014 to Year 2017

In 2014, Sime Darby Bhd disposed of Malaysian and Thai Power businesses to consolidate and
focus their attention on the existing core businesses. Towards this end, the Group penetrated
new markets and territories. Sime Darby made their foray in the automotive business in Taiwan,
Vietnam and also Brisbane, Australia through existing and new marques. This included BMW,
Mini and Kia. In 2015, Sime Darby acquired New Britain Palm Oil Ltd (NBPOL) to expand
their plantation land bank and to leverage on NBPOLs strong operational best practices. This
was essentially a period of strategic positioning, setting the stage for the Group to move to its
next phase of growth to realise value.

In financial year 2015, Sime Darby Property has approximately 30,000 acres of land bank. This
includes 10,900 acres of acres earmarked for future development. They span across Selangor
to Johor and are estimated to worth as much as RM 140 Billion in Gross Development Value
(GDV). Sime Darby Property has several newly approved themed township projects which
include Kota Elmina (1,500 acres), Lagong (1,800 acres) and Kulai (5,000 acres). In addition,
Sime Darby Property had received approval for Bandar Bukit Raja 2&3 (2,700 acres) and
Serenia City (2,300 acres).

In FY2016, Sime Darby focus was on achieving cash flow generation and strengthening their
financial flexibility to support future growth.

4.0 Challenges
1) Expand business cost them to increase their capital and debts
In March 2015, as part of the Groups growth strategy to expand the plantation land bank and
to consolidate the Groups position as the worlds largest producer of Crude Palm Oil (CPO)
and Certified Sustainable Palm Oil (CSPO), the Group acquired New Britain Palm Oil Ltd
(NBPOL) to add over 80,000 hectares of planted oil palm to the Groups total oil palm planted
area. To fund the acquisition, the Group borrowed about RM6 billion, comprising of RM2
billion short term borrowings and USD830 million term loans and assumed borrowings of
NBPOL of about RM0.9 billion. The USD borrowings were raised principally as a natural
hedge as NBPOLs cash flows are primarily in USD and its functional currency is USD. As a
result, the Groups gross debt increased from RM11.2 billion as at 30 June 2014 to RM18.1
billion as at 30 June 2015 and correspondingly the Debt or Equity ratio increased from 38% to
57%. In Full Year 2016, plantation continued the integration of NBPOL and have realised cost
synergies of RM24m.

2) Competitors
In 2017, Sime Darby face some competition where their competitor start to increase in terms
of land bank. For example, SP Setia, which was already one of Malaysias top developers in
terms of sales prior to 2017 announcement, is now slated to become Malaysias third-largest
land owner following the acquisition of I & P Group. It will trail Sime Darby Property and
UEM Sunrise Bhd, whose land banks total 28,000 acres and 13,000 acres. The challenge is the
competitor with large land bank.

3) Malaysia property Market slowing down

The Malaysian residential property market remains soft due to cautious consumer sentiment
and tight lending conditions. The impact of the Overnight Policy Rate cut to loan applications
is expected to be marginal in the coming months without any other stimulus measures.
However, the Groups sizeable land bank in strategic locations augurs well for its future growth.
In the United Kingdom, the property market has been affected by the uncertainty from the
Brexit vote. The impact on the Groups Battersea Development Project is being closely
monitored. Nevertheless, construction is progressing well and the Group is on track to
recognise its maiden profit from this project in the Financial Year ending June 2017.
Economically, the global scenario was subdued in FY2016 with the slowing down of major
economies such as China and the European Union. The tail end of the financial year saw even
more uncertainty in the market when the United Kingdom voted to leave the European Union
causing immediate reactions in the property and financial markets.

4) Weak of Malaysian Ringgit

Furthermore, fiscal consolidations and changes to government policies impacted demand
across the Groups businesses and operating geographies. The depreciation of the Malaysian
Ringgit coupled with market volatility weighed on business sentiment throughout the year,
affecting domestic demand.

5) Labour problem
The priority for FY2016 was to assess risks surrounding migrant labour in the Plantation and
Property operations in Malaysia where progressive improvement plans will subsequently be
developed and key indicators will be used to monitor the effectiveness. The Group also
acknowledges that the oversight of its supply chain will be a continuous challenge and will be
conducted in stages.

6) Reduce of Revenue
In FY 2015, propertys revenue declined by 17.1% to RM2.9 billion due to lower property
sales. In FY2015, profit declined by 34.3% due to lower property development revenue. Group
Profit before Interest and Tax declined by 8.9% to RM3.1 billion, due to the lower profit from
all Divisions except for Property.

5.0 Opportunity

1) New industry for plantation

The Plantation Divisions robust business model as an integrated plantation company with
presence across the value chain allows it to better withstand challenges currently faced by the
industry. With a sizable land bank, the Division enjoys economies of scale and will further
continue to grow as the largest Certified Sustainable Palm Oil (CSPO) producer in the world.
Going forward, the Division will be driven by strategies which are geared towards transforming
performance through innovative solutions. It continues to focus on investing in
transformational innovative solutions to increase productivity and enhance production through
yield enhancement via genome technology, superior agro management and milling
technologies, and mechanisation. In addition, the Division will also be emphasising initiatives
to ensure higher margins for its de-commoditised and differentiated CSPO products.

2) Winning award and huge land bank

Sime Darby Property is a multiple award winning integrated developer based in Malaysia. They
are involved in property development, property investment & asset management, with assets
in Australia, Singapore, Vietnam and the United Kingdom. Sime Darby Property has over 40
years of experience in developing sustainable communities, with 23 active townships or
developments and has approximately 28,000 acres of landbank in four main corridors spanning
from Selangor to Johor, which includes 10,800 acres earmarked for future development. Sime
Darby Property spearheads various projects including themed townships, integrated and niche
developments, transit oriented developments, industrial parks, business centres and retail malls.
In addition to property development, the Division also operates several commercial and
hospitality & leisure assets in Malaysia and Singapore, including TPC Kuala Lumpur (formerly
known as the Kuala Lumpur Golf and Country Club). Sime Darby Property Division was
awarded the Putra Brand Award for FY2016.

3) Have associates group with land bank and capital

Another opportunity where they have associates which is Seriemas Development Sdn Bhd
group (Seriemas). The Groups interest in Seriemas was following the merger with Golden
Hope Plantations Bhd (GHPB) in November 2007. The equity interest of 40.0% arose from a
rationalisation exercise by GHPB in November 2004 which involves the acquisition of
plantation assets by GHPB and the dilution of GHPBs 100.0% interest in property
development companies. Seriemas currently owns land banks in Malaysia and is involved in
property development and investment.

4) The developer with largest land bank owned and land bank located at strategic area
In year 2017, initiate add call with a target price (TP) of RM1.85: Sime Darby Property Bhd is
a prominent property developer with the largest land bank in Malaysia as at September 2017.
Currently, it owns about 20,763 acres (8,402.5ha) of land bank which estimate has a remaining
gross development value (GDV) of RM100.4 billion. The land bank is strategically connected
to major highways and located mainly within key growth areas and economic corridors.
Sime Darby Propertys land bank within Negeri Sembilan and Johor is strategically located in
close proximity to the Kuala Lumpur-Singapore high-speed rail project (HSR). As Seremban
and Muar have been identified as transit stops along the rail line, Sime Darby believe its
property projects in the surrounding areas, like Bandar Ainsdale, Seremban, Nilai Impian 1 and
Nilai Impian 2 in Negeri Sembilan, as well as Bandar Universiti Pagoh in Muar, will benefit
from the development.

Sime Darby Property has strategic land bank in and around the area earmarked as the Malaysia
Vision Valley (MVV), a component of the governments 11th Malaysia Plan and the National
Transformation Plan. The group currently owns 3,196 acres of land within MVV. While Sime
Darby believe its sizeable reserve of land in MVV will underpin Sime Darby Propertys long-
term earnings growth, they also think the development of MVV in the short term will likely
help by its existing projects in Nilai Impian and Bandar Ainsdale.

5) New management team with new innovation and idea

Following the demerger from Sime Darby Bhd, the group announced a new management team
in September 2017, which is tasked with reinventing its growth trajectory. Tan Sri Abdul
Wahid Omar is the chairman, Datuk Sri Amrin Awaluddin is the managing director, and Datuk
Datuk Tong Poh Keow is the executive director and chief financial officer. Sime Darby believe
Abdul Wahid is a valuable asset to the group given his vast experience and connections in the
public and private sectors.

6) Target to increase share price and market cap

Sime Darby initiate coverage on their property with an add recommendation. They value the
stock based on a 50% discount from the estimate of its revalued net asset valuation, translating
into a Target Price of RM1.85. The large discount compared to an average of 35% for other
stocks under coverage reflects the slower monetisation and longer gestation period of its
considerable land bank. Sime Darby believe the recent share price retracement to 0.8 times the
financial year 2018 price-to-book value, which is below peers estimates, represents a good
opportunity to accumulate the stock.

7) Innovation for Property and Plantation division

In FY2016, Sime Darby has rolled out the Stage Gate process in the Plantation and Property
divisions, with a total of 18 projects identified to pilot Stage Gate in the two Divisions. These
projects are in various stages of the ideas-to commercialisation process, with the progression
towards commercialisation managed by each Divisions respective Innovation Committees.

8) Restructure their assets

In March 2016, the Property Division disposed two Singapore subsidiaries which owns two
Singapore properties, namely the Sime Darby Centre at Dunearn Road and the Sime Darby
Enterprise Centre at Jalan Kilang, to a private property fund which is 75% owned by Blackstone
Real Estate Partners Asia Ltd and 25% owned by Sime Darby Property Singapore Ltd, an
indirect wholly-owned subsidiary of the Group, for SGD206.3 million (equivalent to RM600.8
million), resulting in a gain on disposal of RM447.1 million.

During the year, the Group disposed of the following low performing assets:

The Groups 55% interest in Syarikat Malacca Straits Inn for RM55.4 million;

The Groups 90.4% equity interest in East West Insurance Company Limited for
RM10.5 million; and

Development land totalling 238 acres in Semenyih, Selangor for RM254.4 million.

9) Increase of revenue and profit

The increase was mainly due to higher revenue for Plantation following the full year
consolidation of New Britain Palm Oil Ltd (NBPOL)s revenue of RM1.7 billion as compared
to RM723 million for 4 months in FY2015.

For Sime Darby Property Division profit increased by 19.7% to RM1.1 billion mainly
attributable to gains from disposals totaling RM816 million. The disposal gains include two
Singapore subsidiaries of RM447 million, Syarikat Malacca Straits Inn of RM39 million,
compulsory land acquisitions of RM145 million and Semenyih land sales of RM185 million
compared to RM512 million in FY2015.

The Property Divisions Profit Before Interest and Tax (PBIT) jumped 20% from RM889.4
million in FY2015 to RM1,065 million in FY2016, surpassing the RM1 billion mark for the
first time. This was mainly attributable to monetisation of assets, from the disposal of two
subsidiaries in Singapore of RM447.1 million, gain on disposal of Syarikat Malacca Straits Inn
Sdn Bhd of RM39.4 million, gain on compulsory land acquisitions totaling RM145.4 million
and gain on disposal of land in Semenyih of RM184.5 million. The one-off gains from the
disposal of the two Singapore subsidiaries for SGD206.3 million (RM600.8 million) are part
of the Groups initiatives to unlock the value of its commercial properties and establish REIT
platforms.

The Malaysian residential market continued to pose challenges in FY2016. The Property
Development segment recorded a Gross Sales Value (GSV) of RM1.74 billion on the back of
1,894 units sold, compared with GSV of RM2.1 billion and 1,659 units sold in FY2015. The
lower GSV in FY2016 despite higher units sold was mainly due to the stronger demand for
mid-range products.

10) New township and development

In FY2016, the Property Division continued to launch new townships and mixed developments
despite challenging market conditions. These include Elmina West, Serenia City and Bandar
Universiti Pagoh (BUP). Two of these new townships are set to derive value from the presence
of higher education facilities, namely Xiamen University within Serenia City, which enrolled
its first batch of 600 students in February 2016, and the Pagoh Education Hub in BUP,
expecting to enrol its first batch of students by May 2017.

11) Sustainable environment and economic property developer

Sime Darby Property aim to be as the number one sustainable property developer in Malaysia
and beyond, that dynamically realises the needs and dreams of their customers and
communities. They aim to deliver the best performance and products to remain at the forefront
of the industry. Sime Darby Property is committed to transforming spaces into sustainable
communities. They deliver economic, social and environmental value to all communities and
stakeholders. Innovation and sustainability are mindsets that they actively cultivate to deliver
on these promises.

12) Increment of House Price Index

The move by Bank Negara Malaysia to lower the Overnight Policy Rate (OPR) to 3% is
encouraging and this is expected to generally help spur the Malaysian economy and
subsequently deliver positive impact to the property industry. The Malaysian House Price
Index (MHPI) sustained its moderating trend. As at Q42015, the MHPI stood at 227.5 points
(at base year 2000), up by 5.8% on an annual basis. The annual rate of increase for MHPI has
been decelerating since Q42013, due to the various cooling measures to curb excessive increase
of house prices (National Property Information Centre, NAPIC). In the UK, annual growth in
prime central residential London was 0.8% in March 2016, a rate that is unlikely to change
significantly in the short-term as the market digests a series of tax changes, including an
additional 3% stamp duty for buyto-let properties and second homes introduced in April 2016.
While there remains a high level of speculation over the impact of Brexit on the prime London
property market, it remains too early to discern its likely long term impact.

6.0 Strategy

1) Establish Real Estate Investment Trust (REIT) as fund

Sime Darby Property established a Private Real Estate fund to enable future asset monetisation
activities with a long term goal of generating recurring income. It is a platform to monetise and
acquire real estate to generate strong cash flow and recurring income. An opportunity to nurture
REIT management skills through knowledge transfer. Sime Darby Property actually unlocked
the value of two assets through a private real estate trust in Singapore. In March 2016, the
Property Division disposed two Singapore subsidiaries (which owns two Singapore properties)
to a private property fund which is 25% owned by the Group for RM601 million and realised
a gain of RM447 million.

The Group also initiated the reverse take-over of Saizen REIT, a Singapore-listed real estate
investment trust. On 12 August 2016, the Group entered into a framework agreement for the
sale and lease-back of certain industrial properties in Australia to Saizen REIT. Completion of
this Saizen REIT exercise will provide a platform foe recurring income generation.
Furthermore, it provides the Industrial Division with an opportunity to unlock value in its
commercial properties, against the backdrop of weak sentiments in the coal markets. This
exercise is expected to be completed in FY 2017.

The Property Divisions strategy is centred on improving its core execution, preparing for new
growth areas and establishing REIT platforms. It is determined to meet the constantly evolving
needs of the market through delivering the right products at the right price, and driving
operational efficiency from product design to product handover. As for the development of
new growth areas, Malaysia Vision Valley (MVV) represents a key priority for the Property
Division.

2) Be innovative in products offered and services

The Property Division aspires to be an innovative company with innovative products and
services, in order to remain dynamic in a competitive market environment and to differentiate
itself from its competitors. In FY2016, the Division embarked on key innovation projects which
included launching a mobile app, utilising virtual reality technology, digitising the Hand Over
of Vacant Possession (HOVP) process and enhancing marketing efforts through an all-
inclusive digital and social media campaign. The mobile app enables the expansion of customer
base within the country and beyond. The app has a user-friendly interface and virtual tours of
selected properties for prospective customers, while existing homeowners (PRIME members)
are able to manage their property portfolios, view billings, statement of accounts and report
any issues they may have with their property. To further provide customers with an immersive
experience of their potential future homes, the Division utilised virtual reality technology that
renders a 3-dimensional walk-through of the property.

3) Retain their sustainability in the project Sime Darby built

Sustainability remains at the core of the Property Divisions business practices and strategy, as
well as a key component of its design and management approach. It recognises that its main
business of developing large-scale townships has a long lasting impact and should be as
positive as possible, by minimising adverse externalities such as environmental degradation
and social marginalisation through the creation of socially and economically vibrant
communities. The Property Division ensures that its business assets, townships and
developments adhere to strict environmental standards by embarking on the tracking and
management of carbon emissions, waste and water. It has set area and revenue based carbon
and water intensity reduction targets for the year 2020. For waste, the Division has set an area
and per capita based intensity reduction target. The Property Divisions approach includes
stakeholder engagement to support its vision of developing sustainable communities, instil
awareness and understanding of the need to lead a sustainable lifestyle and promote a long term
balanced outcome. Community-based initiatives include the T.R.E.E. (Together in Restoring
the Earths Environment) programme where 980 endangered, rare and threatened (ERT) trees
from 22 species have been planted so far and the Young Sustainability Ambassadors (YSA)
programme, with more than 630 members enrolled to date. The Property Division embarked
on a five year Environmental Safety and Health (ESH) Transformation Plan that underlines
initiatives to strengthen its fundamentals and subsequently, maintain an excellent ESH
performance record. The Property Division recorded a total of 1,189 concern reports for
FY2016. This signifies enhanced awareness on safety among the Divisions stakeholders,
through the reporting of unsafe practices and conditions, near misses and other actions
detrimental to safety.

7.0 Conclusion

Sime Darby Bhd very focusing on