• Sime Darby Plantation has disposed of its entire equity interest in PT Mitra Austral Sejahtera to PT Inti Nusa Sejahtera for US$29.7mil (RM123.1mil) cash.

• PT Mitra has 7,074ha of oil palm estates in West Kalimantan.

• We are neutral on this development.

• The loss of planted areas of 7,074ha is not expected to be significant as Sime Darby Plantation’s planted areas amount to 603,147ha (before this disposal) in total in Malaysia, Indonesia, Liberia and Papua New Guinea.

• The gain on the disposal of PT Mitra was not disclosed in the announcement to Bursa Malaysia. However, we estimate the one-off gain on disposal to be RM87.0mil. We estimate the net book value of the land to be RM36.1mil based on average cost of RM5,097/ha.

• In Sime Darby Plantation’s 2018 Annual Report, the net book value of the group’s landbank of 48,656ha in West Kalimantan is RM248mil. Hence on average, the net book value is about RM5,097/ha.

• We consider the gain on disposal as exceptional. As such, we have not included the gain on the disposal of PT Mitra in our earnings forecast for Sime Darby Plantation.

• Maintain UNDERWEIGHT on Sime Darby Plantation with an unchanged fair value of RM4.30/share.

Source: AmInvest Research - 27 Jun 2019