Finding value in Sime Darby’s demerger

Following the restructuring, the group in its current form will be broken up into three listed entities

PETALING JAYA: The demerger of Sime Darby Bhd will come to fruition by the end of this month, assuming it receives all the approvals including from shareholders.

Following the restructuring, the group in its current form will be broken up into three listed entities – Sime Darby Plantation Bhd, Sime Darby Property Bhd and Sime Darby Bhd.

Each of the stocks offer a different value proposition to shareholders.

Among the three, the Sime Darby holding the residual assets offers immediate returns with a dividend payout. Going forward, it offers potential for more value creation for shareholders, as it is overcapitalised. It has a lot of assets that can be sold or monetised with the proceeds being paid out to shareholders.

Sime Darby Plantation would likely be a core stock for large funds to hold with predictable earnings.

As for the property arm, the sentiment is weak for now. A listing will offer existing investors the opportunity to sell and realise some gains from the de-merger.

The residual assets, mainly the automotive and industrial divisions, will power Sime Darby Bhd. It offers an attractive proposition for investors to hold on to this stock after the de-merger on two counts.

Firstly, there is a dividend of 17 sen to be paid out next month. Secondly, the automotive and industrial divisions have an international business spanning Asia and Australia.

The automotive division is anchored in the sale and distribution of BMW cars, while the industrial division is powered by Caterpillar-branded equipment and machinery.

Sime Darby is overcapitalised and has a lot of assets that can be monetised with proceeds being declared for more dividend payouts.

For instance, its ports in China, the medical divison in Sime Darby Medical Centre and stakes in retail outlets such as Tesco are all good assets that can be monetised or disposed.

The demerger is Tan Sri Wahid Omar’s first restructuring effort to sweat the assets of Permodalan Nasional Bhd. Since helming it last year, Wahid has made the demerger of Sime Darby his priority. Fund managers have also waited for this exercise to see how Wahid will unlock more value in Sime Darby. With so much at stake for the major shareholder, it cannot fail.

This story first appeared in StarBiz Premium.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Business , Sime Darby , demerger , value , assets , property , plantations ,


Next In Business News

Palm oil retreats on profit taking
Pfizer boosts forecast for vaccine sales to US$33.5bil
McDonald's sales surge on BTS meal craze, new crispy chicken sandwich
Singapore central bank removes caps on dividend payments by local banks
Mercury bags RM450mil construction job in Johor Baru�
Glomac registers RM28.3mil profit in FY21
KLCI ekes out slight gains, Petronas stocks, Tenaga advance
AstraZeneca second dose doesn't raise risk of rare blood clots
Barclays pays out more than US$1bln to investors as profits rebound
LSH Capital posts 1H earnings jump ahead of LEAP listing

Stories You'll Enjoy