SDG and AME Elite Consortium Bhd ("AME", Non-Rated) have entered into an MOU to develop a 641-acre green industrial park at Kulai, Johor. Aside from offering ready- and custom-built industrial facilities, the green park will also be supported by a dedicated solar farm. Both parties are expected to sign a JV agreement in mid-2025. Maintain FY24-25 core net profit and TP of RM4.20 and MARKET PERFORM call as current valuations may have already factored in some of the group's property development and RE ambition.
SDG has entered into an MOU with AME to jointly plan a green industrial park development which is expected conclude with a JV agreement around 2Q FY25. We welcome this development for several reasons:
Forecasts. No change to core FY24-25 forecasts.
Maintain MARKET PERFORM and TP of RM4.20 based on 1.6x PBV, at a discount to average 2x for large integrated peer due to SDG's lower 5-year average ROE of 8% vs. 10% of its peers. SDG's efforts to improve return is a positive but actual contribution to the bottom line will Share Price Performanon ce 4.00 4.20 4.40 4.60 4.80 5.00 KLCI 1,616.43 YTD KLCI chg 11.1% YTD stock price chg 11.0% take time (2-3 years or beyond) and face execution risks. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 3) With some of its estates ripe for property development, SDG is defensive and underappreciated from an asset point of view and long-term expansion plans and productivity management strategies would be viewed positively. However, the timing and actual impact on earnings are less clear, and we suspect the group's property and RE ambitions are has probably reflected in current valuation hence our MARKET PERFORM call.
Risks to our call include: (i) Western hostility towards palm oil on sustainability and bio-diversity issues; (ii) impact of weather and labour shortages on production, (iii) weak CPO and PK prices, and (iv) cost inflation particularly fertilisers.
Source: Kenanga Research - 5 Nov 2024
Chart | Stock Name | Last | Change | Volume |
---|
2024-12-06
SDG2024-12-06
SDG2024-12-05
AME2024-12-05
SDG2024-12-05
SDG2024-12-05
SDG2024-12-04
AME2024-12-04
AME2024-12-04
AME2024-12-04
AME2024-12-04
AME2024-12-04
SDG2024-12-03
SDG2024-12-03
SDG2024-12-03
SDG2024-12-03
SDG2024-12-03
SDG2024-12-03
SDG2024-12-03
SDG2024-12-02
AME2024-12-02
SDG2024-12-02
SDG2024-12-02
SDG2024-11-29
AME2024-11-29
AME2024-11-29
AME2024-11-28
AME2024-11-28
AME2024-11-28
SDG2024-11-28
SDG2024-11-27
AME2024-11-27
AME2024-11-26
AME2024-11-26
AME2024-11-26
SDG2024-11-26
SDG2024-11-26
SDG2024-11-26
SDG2024-11-26
SDG2024-11-26
SDG2024-11-26
SDG2024-11-26
SDGCreated by kiasutrader | Dec 06, 2024
Created by kiasutrader | Dec 06, 2024
Created by kiasutrader | Dec 06, 2024
Created by kiasutrader | Dec 05, 2024
Created by kiasutrader | Dec 04, 2024