Highlights

The listing of Sime Darby Property Bhd, if it happens, will be the largest in the property sector of Malaysia. However, the time frame is non-committal for the time being, according to Group Chief Operating Officer Datuk Wahab Maskan.

Sime Darby’s landbank that is identified for property development within the greater Klang Valley (which has the highest potential for urbanization, economic and population growth) could come up to 35,000 acres.

Sime Darby Property has landbank of 19,000 acres worth a total GDV of RM72bn approved as property projects (but yet to be commenced).

Excluding its share of sales revenue from the 1st phase of Battersea project (RM1.3m), Sime Darby Property will have total property sales of ~RM3bn in FY13, and the sales revenue is expected to strengthen into FY14. 

The 2nd phase of the Battersea project, which entails the restoration and redevelopment of Battersea Power Station, will commence by end-2013.

Existing projects aside, Sime is also looking for overseas opportunities that have big impact to the group, in line with the group’s long-term strategy.

Comments 

The listing of the property arm (if materializes) is positive for Sime Darby, as it helps unlocking values of landbank now carried at historical costs.

While the plan remains sketchy at this moment, we believe the listing (if materializes) may also involve Sime Darby eventually roping in other reputable property players to enhances the value of its property business further.

Earnings Forecasts

• Maintained, pending further update from management. Risks  Earlier-than-expected recovery in edible oil demand and prices; and
• Weather uncertainties revisit, which would have a positive impact edible oil prices.

Rating

HOLD


Positive – Strong balance sheet.

Negatives – (1) Weak global economic outlook, coupled with the impending excess supply of CPO will affect both demand and prices of CPO; (2) Cooling economic activities in China and Australia may have an adverse impact on Sime Darby’s earnings; and (3) Overseas expansion risk.

Valuation

SOP-derived TP of RM8.58 remains unchanged (see Figure 1).

Source: Hong Leong Investment Bank Research - 15 Jul 2013