Officials familiar with the deal said that the management might not be keen to issue the perpetual debt paper if there was any downgrade on Sime Darby
KUALA LUMPUR: Maybank Investment Bank Research remains long term positive on Sime Darby Bhd
’s reverse takeover of Saizen REIT via the sale-and-leaseback of 20 industrial properties in Australia for A$355.8mil (RM1.119bil) cash.
It said on Tuesday the REIT platform is the missing puzzle within Sime’s property division. Earnings impact is indeterminate at this juncture.
“We are keeping our earnings forecasts and Hold call. Target price is unchanged at RM7.56 on 21 times FY17 price-to-earnings ratio (PER),” it said.
The research house said following on from its earlier announcement, Sime had on Monday signed an implementation agreement with Japan Residential Asset Manager Ltd (JRAM), the manager of Saizen REIT for the reverse takeover of Saizen REIT.
Under the agreement, Sime has proposed the sale-and-leaseback of 20 industrial properties in Queensland and Northern Territory, Australia to Saizen REIT for A$355.8mil.
The weighted average lease expiry is 16.7 years (but details of rental yields are not known at this juncture). Saizen REIT is expected to fund the acquisition via borrowings (20.6%) and new units issuance (79.4%).
And Sime is expected to hold not less than 25% of the enlarged Saizen REIT after the completion of the placement exercise.
“Besides monetising the Australian properties and deleveraging its balance sheet, the acquisition of Saizen REIT is in line with Sime’s corporate strategy to develop a REIT platform to generate stable recurring income stream.
“With this platform, Sime has greater flexibility in future fund-raising exercises to build a sizeable international portfolio of assets.
“The deal is targeted for completion by 31 Jan 2017. But earnings impact is indeterminate for now as it largely depends on the final percentage of ownership by Sime in Saizen REIT, and the investment costs of the 20 properties disposed (at Sime’s group level), which is also unknown.
“But any disposal gain is unlikely to be material as some of these Australian assets were acquired only in recent years. Maintain earnings forecasts for now,” said Maybank Research.
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