KUALA LUMPUR: The decision by Sime Darby Property's to form a 50:50 joint venture with Lagenda Properties Bhd for the construction of affordable housing in Gurun, Kedah, has received positive feedback from Hong Leong Investment Bank Bhd (HLIB Research).

The research firm views this tactical change away from the complete sale of land as a chance to evaluate the viability of the affordable housing market, which could lead to new project opportunities in different states.

"We are pleasantly surprised by this development, as this represents yet another effort from the group to activate its non-core land banks.

"This project is the group's first foray into the affordable home segment, leveraging the expertise of its joint venture partner Lagenda, which specialises in this domain.

"As opposed to outright land disposal, the joint venture allows the group to learn, explore, and study the viability of the segment," it added.

According to HLIB Research, the success of the initial affordable housing project has the potential to become a blueprint for Sime Darby Property's future ventures in different states, given the scalability and replicability of the affordable homes segment.

"This strategic move aligns well with the government's ongoing decentralisation efforts to promote economic development across different states, presenting SimeProp with timely opportunities for further expansion in these regions," it continued.

The research firm also mentioned that the affordable housing project has the potential to yield a net profit margin of roughly 20 per cent.

The anticipated profit allocation for Sime Darby Property is estimated to be about RM15 million, or an earnings per share (EPS) of 0.22 sen annually, from the financial year 2025 (FY25) onwards.

"This would account for approximately 3.9 percent of our FY25 earnings forecast," it said.