Sime Darby Property (SDPR) announced that its wholly-owned subsidiary Sime Darby Property (Capital Holdings) Pte Ltd (SDPCH) has formed a joint venture(JV) with LOGOS Property Group Ltd’s 100%-owned subsidiary LOGOS SE Asia Pte Ltd under an industrial development fund collaboration. The fund aims to initially raise USD200m (c.RM850m) in seed money from accredited and institutional investors to finance the planned development of industrial property in Klang, Selangor on a 51:49 shareholding basis between SDPCH and LOGOS SE respectively. The Group has allocated a 177-acre (c.70.8ha) site within its prime Bandar Bukit Raja township in Klang for the purpose of this JV. We are positive as this deal could unlock the value of the said land and leverage on LOGOS Property’s specialist experience in developing property solutions in the logistics sector. Details are still light at this juncture on market value of the land. We keep our earnings unchanged for now and maintain our Outperform call with unchanged RM0.79 TP, pegged at c.70% to its RNAV.

• JV synergies. We understand that the JV will focus on developing and investing in build-to-suit to lease or sell assets, primarily for clients in the logistics sector. Also, the JV is expected to provide fund management and development services to industrial development funds established by the JV. As such, we believe that JV is expected to leverage on synergies between Sime Darby Property and LOGOS Property primarily from Sime Darby Property’s presence and track record in the Malaysian property market and the company’s extensive land bank while leveraging on LOGOS Property’s specialist experience in developing property solutions in the logistics sector in the region, and also its tenant network.

• Long-term recurring income. We understand that the Group is looking to build a long-term recurring income (via fund management fees, etc) from its investment management portfolio and via this ‘private-equity’ set-up. This would allow the Group to develop the 177-acre tract primarily financed by seed money estimated at USD200m (c.RM850m) from institutional investors. We understand earnings impact could only happen from FY22 only. As for the development master plan, we understand that the 177-acre land potentially has c.8m square feet of gross leasable area of industrial and logistics facilities.

Source: PublicInvest Research - 30 Sept 2021