Strong debut by Sime Darby but plantations, property fall

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

KUALA LUMPUR: Sime Darby Bhd surged on the Main Market of Bursa Malaysia on Thursday after the demerger of Sime Darby Plantation and Sime Darby Property as separate entities from the holding company.

It opened 55 sen higher at RM2.40 while Sime Plantations added just one sen to RM5.60. However, Sime Darby Property fell 20 sen to RM1.30.

The adjusted price for Sime Darby was RM1.85 while for plantations it was RM5.59 and for the property unit it was RM1.50.

At 9.11am, the KLCI was up 1.63 points or 0.09% to 1,722.01. Turnover was 142.67 million shares valued at RM96.09mil. There were 146 gainers, 130 losers and 203 counters unchanged.

Sime Darby was up 48 sen to  RM2.33 with 11.4 million shares done.

Sime Property fell 27 sen to RM1.23 with 1.74 million share. 

Sime Plantations nine sen lower at RM5.50 with 1.02 million shares done.

The listings of Sime Darby Plantation and Sime Darby Property as separate entities from the holding company Sime Darby was to unlock sustainable value for the group and its investors.

Post-demerger, the leaner Sime Darby will focus on the group’s trading and logistics businesses. Also, the company will pay out a dividend per share of 17 sen. The ex-date for the stock is Dec 4

StarBiz reported Sime Darby Plantation is a “must buy” stock, considering that it is a heavyweight in the sector. Any fund wanting exposure to the plantation sector would need a piece of the stock in its portfolio.

At its listing price of RM5.59 per share, its valuation is undemanding compared to its peers such as IOI Corp Bhd and Kuala Lumpur Kepong Bhd

Sime Darby Plantation was listed with a market valuation of RM38bil, making it one of the most valuable plantation companies in the world.

Sime Darby Property has vast tracts of land ripe for development around the Klang Valley, stretching from Rawang in the north right down to Port Dickson in the south. The huge chunks of land sit on both sides of highways and are ideal for township developments.

Sime Darby Property’s valuation at its listing price is comparable to the likes of Eco World Development Group Bhd and Mah Sing Group Bhd

However, sentiment on the property sector is weak. For property companies, having land in prime locations is not enough. Sime Darby Property needs a sizzling piece of township development that would keep it going for a few years as the sector rides through a rough patch.

Within Sime Darby is the healthcare business, a 12% stake in Eastern and Oriental Bhd, the port business in China and 8,700 acres in Nilai with connectivity to the commuter train service and high-speed rail project.

Sime Darby is over-capitalised and the only natural thing to do next is to sell off the underperforming assets and return the money to shareholders.