PETALING JAYA: Sime Darby Property Bhd
(SimeProp) is well-positioned for long-term growth, underpinned by its RM1.25bil New Economy Venture (NEV) fund, which is expected to accelerate the group’s expansion into data centres, industrial and logistics assets while preserving balance sheet strength
Analysts are generally positive on the stock, viewing the fund as a strategic step towards building a larger recurring income base and unlocking value from its extensive landbank.
RHB Research maintained its “buy” call with a target price of RM2.15, citing a potential upside of 51%, while Hong Leong Investment Bank Research reiterated its “buy” recommendation with a target price of RM2.10.
The key catalyst is the launch of the RM1.25bil syariah-compliant NEV fund, comprising a RM1bil main fund and a RM250mil sidecar.
“With a fund life of five years, we expect SimeProp to realise more sizeable returns upon the closing, possibly by injecting the assets held in the fund into its upcoming real estate investment trust,” it said.
The fund has already secured full commitments at its first close from SimeProp, the Employees Provident Fund, Lembaga Tabung Angkatan Tentera and Great Eastern Life Assurance.
SimeProp itself committed RM500.1mil as a co-investor.
RHB Research sees the fund as a major confidence boost for the group’s industrial and new economy ambitions.
It noted that the NEV will invest in built-to-suit-to-lease data centres as well as industrial and logistics developments located within SimeProp’s townships.
It believes the initiative comes at an opportune time as Elmina Business Park gains traction and the developer ramps up efforts to grow recurring income through industrial assets.
The fund is also expected to provide a capital-light avenue for future growth.
Based on a 70:30 debt-to-equity structure, RHB Research estimates the RM1.25bil equity commitment could support total investments of about RM4.25bil after leverage, enabling the fund to absorb substantially more industrial assets in the years ahead.
The fund is targeting an internal rate of return of between 10% and 15%.
“The projects backing the fund are still in their development phase, so any meaningful earnings contribution is some way off.
The lack of disclosure on the underlying assets also makes it difficult to assess the potential upside at this stage,” an analyst told StarBiz.
Furthermore, the analyst said the RM1.25bil commitment should be seen as a starting point rather than the fund’s eventual size.
“With borrowings at the fund level, the investment pool could expand significantly, enabling SimeProp to pursue larger opportunities,” he added.
