Sime Darby needs to be more aggressive in M&As, says CIMB
KUCHING: CIMB Investment Bank Bhd (CIMB Research) believes coglomerate Sime Darby Bhd (Sime Darby) needs to be more aggressive in its merger and acquisition (M&A) pursuits in order to achieve its aim of growing its market capitalisation.
During its large group session at Invest Malaysia, Sime Darby revealed that it aspires to reach a market capitalisation of RM100 billion but did not specify a timeframe.
“To achieve this 73 per cent rise in market cap from current levels, we believe that it will need to be more aggressive in its M&A pursuits,” CIMB Research opined in a report yesterday. “It has expressed interest in expanding its plantation assets, motor distribution business and overseas property portfolio.
“It is looking at expansion opportunities in Africa given the limited landbank in Malaysia and Indonesia.”
Around 90 to 100 investors attended Sime Darby’s large group session at Invest Malaysia 2014 yesterday where Alan Hamzah, executive vice president of group strategy and business develop- ment made a comprehensive presentation on the group’s businesses, its key strengths and growth strategy.
Hamzah highlighted that Sime’s strong presence in its diversified businesses has helped it to generate strong PBIT and operating cash flows even during difficult economic conditions.
Over the past four years, the group’s profit margin was fairly steady despite the volatility in its diverse businesses. He revealed a market cap target of RM100 billion but did not provide a specific timeframe for it. Sime will pursue M&As only when the valuations for assets to be acquired are sensible.
“We believe that Sime Darby has been able to achieve stable profit margins over the past few years due partly to efficiency gains for its key businesses, acquisition of value-enhancing assets and disposal of non-core businesses,” CIMB Research said.