Sime IPOs this year?

  • Commodities
  • Thursday, 16 Feb 2017

Sources said the diversified group

PETALING JAYA: Sime Darby Bhd, which is planning to split up the group’s operations into different entities and list them, could see the listings happening within this year.

Sources said the diversified group’s shareholders, mainly driven by Permodalan Nasional Bhd (PNB), have set an aggressive target of seeing the corporate exercises take place by the end of this year.

Earlier this week, the conglomerate, which generates most of its profits from its plantation and property segments, held a briefing for top executives on the demerger.

According to one source, Sime Darby would have to “rightsize” its workforce at the holdings level as part of the listing exercises.

“With the demerger, there is no need for so many people at the holding company level,” the source said.

Based on information from Sime Darby’s latest annual report, the group currently employs more than 120,000 people in over 20 countries.

Some 56% of its profit before interest and tax comes from Malaysia itself, according to the report.

“At the moment, discussions are still ongoing centred on the best way to implement these corporate exercises, and this has to be presented to the board,” the source said.

It is learnt that the company would likely provide more information after it releases its half-year financial results later this month.Last month, Sime Darby said it was planning to break up its operations by listing its plantation and property divisions.

Other businesses, including its heavy machinery division, BMW distributorship, port operations and trading, will remain under the existing listed entity.

In relation to the listing exercises, group chief executive officer (CEO) and president Tan Sri Mohd Bakke Salleh had said that the initiative would “enable each business to pursue its distinct aspirations with greater focus and agility, taking advantage of potential growth opportunities to maximise value for all shareholders”.

In the past two years, Mohd Bakke has focused on optimising cost at the group, including cutting down on the hiring of external advisers and consultants.

But because the price of crude palm oil has been lacklustre over the same period, the impact of these cost savings to Sime Darby’s bottomline has been somewhat minimal.

The current Sime Darby group, which has a market value of over RM61bil based on yesterday’s closing share price of RM9.10, was created in 2007 via the merger of Golden Hope Plantations Bhd, Kumpulan Guthrie Bhd and Kumpulan Sime Darby Bhd.

At RM9.27, its stock is close to its 52-week high of RM9.27 and is trading at a price-to-earnings ratio of 26.38 times its financial year 2017 earnings, according to Bloomberg data.

Analysts reckon the listing exercises would enable the group to unlock most of its value.

“The exercises could help the group unlock value via the better appreciation of its individual business units as pure plays and the removal of the discount attached to its conglomerate structure,” CIMB Research told its clients.

Sime Darby, after the merger of the three companies, was listed on Nov 30, 2007, creating the world’s largest listed palm oil producer, and Malaysia’s largest property developer in terms of land bank.

The other major divisions in Sime Darby are its motor and industrial divisions.

Sime Darby Motors is the second-largest BMW dealer in the world, and one of the largest automotive dealer groups in the Asia-Pacific region, while Sime Darby Industrial is the largest dealer of Caterpillar in Asia Pacific, according to the company.

Other businesses within the group are the logistics and healthcare divisions, where Sime Darby Logistics operates the largest multi-purpose port in China’s Shandong Province, as well as its healthcare business.

The current plan to demerge Sime Darby has been on the cards for a long time, but only took off aggressively after a change in the leadership at PNB, where Tan Sri Abdul Wahid Omar was appointed chairman on Aug 1 and Datuk Abdul Rahman Ahmad made president and CEO two months later.

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Business , sime darby , demerger , executives , briefing , IPOs , PNB , permodalan , Bakke , Salleh ,


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