Sime Plantation a surprise loser
Property arm also fares poorly but holding company exceeds expectations
KUALA LUMPUR: The debut of the demerged Sime Darby companies on Bursa Malaysia turned out much the way many had predicted.
Sime Darby Bhd, the investment holding company of the industrial and motor businesses, roared upwards yesterday, but the gains were not enough to offset the losses by the plantation and property companies that made their new start on the stock exchange.
The bumper dividend of 17 sen a share that would be paid to Sime Darby shareholders helped the stock surge nearly 30% from its listing reference price of RM1.85 to RM2.40 a share.
It closed 50 sen higher to RM2.35, with 124.72 million shares being traded, making it among Bursa Malaysia’s top gainers.
But Sime Darby Plantation Bhd emerged as the biggest loser from Sime Darby’s demerger exercise.
The counter shed 58 sen or approximately 10.4% to RM5.01 at the end of trading, driven by an active selldown by investors. A total of 38.19 million shares were done.
The stock started trading at RM5.60 or up by one sen as compared to its listing reference price of RM5.59.
The selldown of Sime Plantation comes as a surprise, as it is one of the largest plantation companies in the world by planted area and should be sought after by fund managers.
Danny Wong, fund manager and chief executive officer (CEO) of Areca Capital, said that he was surprised at the quantum of decline in Sime Darby Plantation’s share price.
“Investors may have been selling the shares of Sime Darby Plantation and Sime Darby Property to buy the Sime Darby counter instead, as there is more value in the holding company.
“As per estimates, Sime Darby’s forward dividend yield and return on investment are likely to be higher than the other two companies. In addition, Sime Darby’s price-toearnings ratio is also expected to be lower than the other two, making it cheaper to purchase.
“So, it will be more attractive for the investors to hold Sime Darby compared to Sime Darby Plantation or Sime Darby Property,” he said.
However, Wong indicated that prospects of both Sime Darby Plantation and Sime Darby Property would likely improve in the medium term.
Similarly, Sime Darby Property saw a significant decline in share price after it tumbled by about 20% or 30 sen to RM1.20 at market close. About 69.09 million shares changed hands.
The stock fell on its debut, opening at RM1.30 or a discount of 20 sen versus its reference price of RM1.50.
Sime Darby resumed trading yesterday after it was suspended from Monday to facilitate the listings of Sime Darby Plantation and Sime Darby Property.
The combined market value of the demerged entities is RM58.01bil, which is almost RM2.8bil less compared to the RM60.8bil market cap of Sime Darby prior to the listings.
Commenting on the poor early trade of Sime Darby Property and Sime Darby Plantation, the former’s chairman Tan Sri Abdul Wahid Omar said that it was more important to focus on the fundamentals of companies, moving forward.
He remains upbeat on the prospects of all three companies and believes that the share prices will trend upwards, given improvements in the respective companies’ financials.
“Sime Darby’s successful demerger exercise represents a historic moment in Malaysian corporate history, with the three entities being quoted on Bursa Malaysia on the same day.
“In terms of the combined share price of the three entities, we opened today at RM9.30 cumulatively as compared to Sime Darby’s closing price of RM8.94 on Nov 24 prior to the suspension of trading. Overall, there is an increase of roughly 4%.
“This is a positive development for us as we continue to create value for our shareholders,” Abdul Wahid, who is also group chairman of Permodalan Nasional Bhd, told reporters after the listing ceremony.
Meanwhile, Fortress Capital CEO Thomas Yong said that investors could have reduced their shareholdings in Sime Darby Plantation to avoid the exposure to the heightened sensitivity of crude palm oil (CPO) prices.
“Given the weakness in CPO, partly due to the strengthening of the ringgit and stronger production post-El Nino, the outlook for Sime Darby Plantation is uncertain, and therefore could be the cause of yesterday’s selldown.
“As for Sime Darby Property, despite a decline in share price on the first day of trading, we might see some upside moving forward on the back of a clear business strategy and undemanding valuations currently.