SIME DARBY BHD
By MIDF Research Neutral (maintained) Target price: RM9.05
POST-BRIEFING with Sime Darby Bhd, MIDF Research has reiterated its “neutral” call and target price of RM9.05.
SIme Darby has unveiled more details on its demerger plan, which will see its plantation and property arms spun off into distinct listed entities.
MIDF Research noted that approvals by the relevant authorities were expected in by November this year, followed by an extraordinary general meeting.
The eventual listing of both Sime Darby Plantation Bhd and Sime Darby Property Bhd is likely to happen by the end of 2017, the research house said.
“Post internal restructuring and share split, the final outstanding shares of Sime Darby Plantation and Sime Darby Property will be 6.801 billion share units, which is the same as the current Sime Darby Bhd.
“The details from the briefing have been factored in previously, hence there is no change to our earnings estimate for FY18 and FY19.
While the group’s valuation at 25.3 times of price to earnings multiple appeared to be high, its share price was supported by decent dividend yield of 2.7% and the expectation of value creation from the demerger corporate exercise, said the research house in a note.
Sime Darby Plantation, which is the world’s largest plantation company by planted area, owns 602,509 hectares of land planted with oil palm.
Moving forward, it aims to achieve fresh fruit bunch yield of 25 tonnes per hectare and oil extraction rate of 25% by 2025, 20% earnings before interest and tax (Ebit) contribution from the downstream division and integrated economics across the value chain.
On the other hand, Sime Darby Property is Malaysia’s largest property company by landbank.
Its projects’ remaining gross development value is RM101.1bil and Sime Darby Property has unbilled sales of RM1.5bil as of endFY17.
Following the demerger exercise, the future Sime Darby’s main businesses are in the motors and industrial domain.
“These two divisions contributed to more than 90% of Sime Darby’s current Ebit.
“The motors division sold about 84,000 units of cars in FY17 while the industrial division has an order book of RM2.2b as of endJune 2017,” said MIDF Research.