"We are stripping out Jining Port’s earnings contribution for the group’s FY21–23F earnings forecast, while adding in cash proceeds of RM155.7mil (1st payment from the sale of stake in Jining Port Companies) in the group’s net debt.
"The annual interest income from the cash proceeds (assuming 3%
annually) will be approximately RM4.7mil per year, and this will be insignificant to Sime’s large earnings base," it said.
The research house increased its fair value slightly to RM2.87 a share from RM2.86 a share previously.
It said it is slightly positive on the stake sale as Sime Darby is monetising and divesting its non-core businesses and assets.
"We understand that the group is also looking to dispose its Weifang seaport – which has a net book value of RM963.0mil
as at 30 June 2020," it added.
Sime Darby announced yesterday that it is disposong of its entire 70% stake in Jining Port Companies, which consists of three river ports, for a total of RM181.6mil cash.
Following Sime Darby's analyst briefing, Kenanga said the total net book value of Jining Port Companies as at end-October 2020 was about RM172mil.
After accounting for transaction costs, M&A costs and other expenses incurred, the net loss from the disposal is about RM8mil.
The total net profit contribution of Sime Darby's 70% stake in Jining Port Companies is about RM5mil annually to the group, which accounts for less than 1% of the group's forecast FY21 total earnings.
Sime Darby will also subscribe 49% in a new vehicle with Jining Port and Shipping Development Group Co Ltd (JPSDG), called Jining Port and Shipping Port Services Co Ltd (JPSPS), for RM123.5mil.
JPSDG will hold the remaining 51% stake.
Sime Darby will then progressively exit JPSPS over the next 3 years for RM132mil.
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