KUALA LUMPUR (September 26): Analysts are positive on shares of Sime Darby Bhd on potential special dividends from the disposal of its non-core assets, among others. This follows the latest sale of 1,282 acres of its Malaysia Vision Valley (MVV) land in Labu, Negeri Sembilan to NS Corp, a state-owned body, for RM445 million or RM8 per square foot (psf).
The latest transaction comes shortly after Sime Darby announced the sale of 1,382 acres of his MVV land last month, also to NS Corp, for RM460 million or RM7.64 psf.
As of 11:57 a.m. on Monday, September 26, shares of Sime Darby rose by one sen or 0.46%, giving it a market capitalization of RM14.78 billion. Its share price has fallen 5.65% since the start of the year.
In recent years, Sime Darby has gradually disposed of its non-strategic assets as part of its five-year value creation plan to rationalize its portfolio and redeploy its capital to focus more on its core industrial and automotive businesses.
Since acquiring 8,796 acres of MVV land from Sime Darby Plantation Bhd in 2017 as part of the Sime Darby Group spin-off exercise, Sime Darby has completed three transactions to sell its MVV land. In October last year, she sold 760 acres of her MVV land to Sime Darby Property Bhd for RM280 million. With the last two disposals totaling 2,664 acres of his MVV land, he now has approximately 5,372 acres left to sell.
According to RHB Research analyst Jim Lim Khai Xhiang, it is understood that Sime Darby is still in talks with other interested parties to sell the remaining 5,372 acres of his MVV land.
“His recent sales (compared to 2,664 acres to NS Corp), at 19% above cost, will yield RM905 million, which Sime Darby can use for investments, dividends, working capital and repayment Sime Darby is expected to record net gains (including reversal of consolidation adjustments) of RM399 million and RM412 million, totaling RM811 million, upon completion of sales during the year. fiscal year ending December 31, 2024 (fiscal year 24),” it said in a report on Monday.
Lim has a “buy” call on Sime Darby, with a higher target price of RM2.75 from RM2.55 previously, as he likes the stock for its dividend yield, the resilient industry segment of Australasia, potential special dividends from the divestiture of its core non-assets and a growing fleet of electric vehicle offerings.
Kenanga Research analyst Wan Mustaqim Wan Ab Aziz also maintains an “outperforming” call on Sime Darby, with a target price of RM2.60.
“We like the stock for the robust growth of its core business thanks to the economic recovery; and the great brands in its stable such as BMW and Caterpillar, thus ensuring sustainable earnings growth. The stock also offers a dividend yield attractive by more than 5%,” he wrote in a report.
Wan Mustaqim estimates that the divestiture will result in a one-time gain of RM412 million for Sime Darby. “Fiscal year is slightly accretive to earnings. The interest savings on the proceeds will increase his FY24 earnings by 2%. The proceeds will also reduce Sime Darby’s net debt to 0.22 times from 0, 23 times,” he said.