Sime Darby’s gear will be reduced with the sale of land

PETALING JAYA: The sale of another huge piece of land in the Malaysia Vision Valley (MVV) to Negri Sembilan by Sime Darby Bhd will see it save on interest payments and increase forecasted profits for fiscal year 2024 (FY24) by around 2%. Kenanga Research said proceeds from the sale would also reduce the group’s net debt.

Last Friday, Sime Darby said it was a plot of land at MVV measuring 1,281.8 acres for LEAP-listed Uni Wall Aps Holdings Bhd. through a Negri Sembilan state company, NS Corp, for RM445 million in cash.

Kenanga Research said it was a fair price, with the deal valuing the land at around RM13 per square foot (psf). In comparison, he noted that Sime Darby recently sold an MVV plot of land to property developer Matrix Concepts Holdings Bhd at the same price of RM13 psf while other plots of farmland nearby are listed ranging from RM9.5 psf to RM14.9 psf.

“Sime Darby will book a one-time win of RM399mil. The exercise would be earnings accretive – the interest savings on the proceeds will increase its FY24 earnings by 2% while the proceeds will also reduce its net debt by 0.23x to 0.22x,” a he declared.

However, the research firm said it was standing by its guidance pending the conclusion of the deal.

According to her, the land is currently classified as agricultural land with potential for development and Uni Wall plans to build a high-tech industrial hub called NS International Tech Park, focusing mainly on the aerospace, food and beverage, pharmaceutical and cosmetics industries, as well as a new central business district for residential, commercial, regional office centers and a medical center.

Meanwhile, RHB Research notes that in recent months Sime Darby has sold 2,664 acres of his MVV land, as part of his effort to monetize this non-core asset. The research firm said Sime Darby can use the proceeds for investments, dividends, working capital and debt repayment.

“We believe Sime could reinvest in its core automotive and industrial businesses, potentially acquiring adjacent and complementary assets,” RHB said.

Since acquiring 8,796 acres of MVV land from Sime Darby Plantation Bhd in 2017, as part of Sime Darby’s spin-off exercise, it completed three transactions to sell its MVV land.

“This leaves Sime Darby with 5,372 acres of MVV land, which we believe the group will continue to sell as it is currently in talks with more interested buyers,” the research firm added.

Post-deal, RHB also maintains its baseline earnings forecast, as gains from land sales are not essential. However, it raised the target price of the stock to RM2.75 (from RM2.55 previously) by adjusting the value of the MVV land in its sum-of-the-parts assessment.