Tesco stake sale seen as in line with Sime Darby’s plan

  • Business
  • Thursday, 09 Jul 2015

PETALING JAYA: The proposed disposal of Sime Darby Bhd’s 30% stake in Tesco Malaysia will be in line with the plantation giant’s move to dispose of its non-core business and ease future cashflow.

MIDF Research, in a report yesterday, noted that Tesco Malaysia only accounted for 0.6% of Sime Darby’s total earnings last year.

“In its financial year ended June 30, 2014 (FY14), Tesco Malaysia contributed RM25mil to Sime Darby’s profit before interest and taxes (PBIT).

“Against the group’s PBIT of RM4.22bil, it was only 0.6%,” it said, adding that Sime’s Darby’s net asset for its 30% stake in Tesco Malaysia was RM94.4mil based on its FY14 annual report.”

AmResearch in its report yesterday said the disposal of Tesco Malaysia, if it happened, could help Sime Darby to part-finance the recent acquisition of New Britain Palm Oil Ltd (NBPOL).

“This could be positive from a cash flow point of view, and a disposal of its stake in Tesco Malaysia would be in line with a disposal of a non-core business,” it said.

The research house said Tesco Malaysia posted a 73% rise in net profit to RM82mil in FY14 from RM48mil previously and that its net assets as at June 30, 2014 stood at RM315mil.

Sime Darby launched a general offer last October to take over the London and Papua New Guinea-listed NBPOL for £7.15 (RM38.70) per share or £1.07bil cash.

AmResearch is maintaining a “hold” call on Sime Darby, with an unchanged sum-of-parts fair value of RM9 per share while MIDF is retaining a “neutral” call on Sime Darby with a target price of RM8.80.

“As the deal has yet to materialise, we maintain our FY15 and FY16 core net income estimates at RM1.88bil and RM2.5bil respectively.

It said the low crude palm oil price, now at RM2,210 per tonne should keep its share price upside rather limited.

“On the other hand, its decent dividend yield of 3.2% should lend downside support to its share price,” it added.

Sime Darby shares closed down two sen to RM8.51 yesterday.

Reuters reported that Japan’s Aeon Co Ltd was interested in buying the Malaysian operations of Britain’s Tesco PLC, valued at US$1.4bil (RM5.32bil).

It purchased the Malaysian arm of French retailer Carrefour SA in 2012 for 250 million euros (US$275.08mil) and last year expanded e-money services in Thailand.

Buying Tesco Malaysia’s operations would make Aeon Malaysia the biggest hypermarket group.

The Japanese retailer has 28 hypermarkets in the country.

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