- Sime Darby is selling ~135 acres of freehold land (currently with agriculture status) in Elmina, Sungai Buloh to Eastern & Oriental (E&O) for RM239.8mil cash.

- The parties last Friday inked the S&P for the proposed transaction following a memorandum of agreement last September and a collaboration agreement in August 2011.

- E&O group will undertake a “wellness” themed mixed development, which will include semidetached houses, cluster houses, double-storey link houses, condominiums, serviced apartments and a wellness centre. With a gross baseline GDV of RM1.54bil, this will be E&O’s first township development in the Klang Valley.

- As further consideration, E&O group agrees to share with Sime Darby the amount of the actual sales of the properties that exceeds RM1.54bil at an agreed ratio of 80:20.

- E&O said the RM239.8mil consideration is made up of RM192.76mil for the land (without major infrastructure) at RM32.78 psf and RM47.04mil for major infrastructure at RM8 psf. Taking the market value as appraised by a valuer, the price translates into ~RM41 psf.

- That Sime Darby would develop the major infrastructure in the masterplan for Elmina West estate is one of the conditions. The delivery of vacant possession is estimated to be in 1Q 2016, and the transaction could be completed by 1Q 2019, upon the completion of the major infrastructure.

- Sime Darby’s 32% stake in E&O will soon be reduced to ~22% following its proposed sale of a 9.9% stake to E&O MD Datuk Terry Tham Ka Hon for RM2.90/share or a total of RM319mil cash.

- E&O will implement the development on the land in five separate phases. With staggered launches within each phase, E&O will pay the 20% enhanced GDV before the last day of each calendar month in respect of units sold in the preceding month.

- The land is part of a larger plot of 843 acres, which are part of the Elmina West estate. Emina West estate in turn is part of the 5,000-acre City of Elmina, located along the Guthrie Corridor Expressway.

- We are neutral on the proposed transaction and maintain our numbers. We reiterate our BUY on Sime Darby, with an unchanged fair value of RM11.20/share – a 10% discount to our SOP value of RM12.45/share.

Source: AmeSecurities