The market flavour of the week is Some Darby Bhd. breaking up into three different core group and be listed separately as Sime Darby Bhd., Some Darby Property Bhd. and Sime Darby Plantations Bhd.
Sime Darby may raise RM27 billion from unit listings
BY AMIR HISYAM RASID – 28 JANUARY 2017 @ 4:15 PM
Facebook 15 Twitter Share 15
KUALA LUMPUR: Sime Darby Bhd could raise more than RM27 billion from the listings of its plantation and property companies while maintaining controlling stakes in them, analysts estimate.
Analysts gave thumbs-up to the spin-off plans but were split over upgrading, maintaining or even downgrading their recommendations on Sime Darby. Kenanga Research said if it kept a 51 per cent stake in each entity, the conglomerate could raise some RM27.2 billion from the listings.
The plantation arm could fetch RM19.4 billion and the property firm is expected to raise RM7.8 billion, which represents cash per share of RM4.10. Sime Darby announced on Thursday that its plantation and property units would be listed on Bursa Malaysia as Sime Darby Plantation Bhd and Sime Darby Property Bhd.
“We are positive with this move which should unlock value in both spin-offs, while substantially improving Sime Darby’s balance sheet position and potentially providing a bonus to shareholders in the form of dividends or shares in the new companies,” said Kenanga Research .
“Assuming Sime Darby retains 50 per cent of the RM27.2 billion funds raised and pays out the rest as dividends, this would represent a bumper dividend of RM2 per share or 22 per cent of the current share price.
“With the remaining funds, we would expect Sime Darby to enter into a net cash position from the current net gearing position of 0.4 times,” said the firm.
Kenanga Research upgraded its call on Sime Darby to “outperform” from “neutral” with a higher target price of RM9.88. MIDF Research downgraded Sime Darby to “neutral” with an unchanged target price of RM9.05 as it believed most of the optimism on the corporate exercise had been priced in.
The firm said its shareholders are likely to enjoy long-term benefits from the removal of “conglomerate discount” attached by the market.
“This is especially true for the plantation division as pure planters tend to command higher price earnings valuation against conglomerates with many businesses,” it said. Public Investment Bank Bhd affirmed its “outperform” call and RM9.30 target price.
It said Sime Darby Plantation, which was set to become Malaysia’s biggest listed plantation company, also had the largest planted landbank in the world. This is based on its vast planted landbank of 603,254ha across Malaysia, Indonesia, Papua New Guinea and Liberia.
“Taking into consideration its landbank size, regional footprint, fresh fruit bunch (FFB) production growth, FFB yield, age profile and current strong crude palm oil prices, we strongly believe the plantation arm should be able to attract healthy valuations for its listing.
“Based on our preliminary studies, the market capitalisation would likely be in the range of RM48 billion-RM55 billion or an estimated price earnings ratio of 25-30 times,” it said. PublicInvest said Sime Darby Property is set to be one of the largest players in the country based on its annual property sales of more than RM2 billion.
“Based on our valuations, the property arm could be listed at an estimated market capitalisation of not less than RM10 billion. However, the listing might be in the later part of the year as property sentiment remains lacklustre,” it added. Sime Darby kept its improvement on Bursa, edging up 4.65 per cent to RM9.23 from Thursday’s close of RM8.82.
The stock was Bursa’s top gainer yesterday and best performer year-to-date with a 13.95 per cent gain.
The decoupling of groups from the existing Sime Darby Group, which arisen from the merger of Some Darby, Guthrie and Golden Hope Plantations ten years ago is timely and a brilliant step moving forward.
The conglomerate now is listed under the Forbes Global 2000 list as number 813. If measured under market cap, then it is at number 867 of the same list.
It would provide better growth, arisen from focused separate teams and strategies. Example is property is a segment which Sime Darby could really capitalise and existing resources be optimised for better return on investment and value creation.
This is a strategy where Sime Darby Property could horse-back on the Government strategy of wealth creation and gallop on the bullish-ness of making Malaysia a high income nation.
The appetite for property, especially for commercial and high end and luxury segment is quite promising. Considering the Forest City development in Iskandar Malaysia, is a good example of the opportunities available and waiting to be capitalised.
The development of the High Speed Rail from Kuala Lumpur to Singapore is expected to pass through many of Sime Darby assets and investments, which could be developed for new satellite townships along the route.
Unlocking, realising and optimising value creation for PNB is a strategy laid by the new management team led by Tan Sri Abdul Wahid Omar as Chairman and Dato’ Abdul Rahman Ahmad as Group CEO two months ago. Unit trust schemes under PNB are strategic and majority shareholder of Sime Darby Bhd.
The Star story:
Friday, 25 November 2016
Malaysia’s largest fund-manager unveils strategic plan
BY HANIM ADNAN
KUALA LUMPUR: Permodalan Nasional Bhd (PNB), the country’s largest fund-management company which has a new team at the helm, has unveiled a six-year strategic plan to deliver sustainable, consistent and competitive returns to its unitholders.
PNB has set a target to increase its total assets under management to about RM350bil by 2022 from about RM259.49bil currently.
In a rare press briefing on its performance, PNB disclosed that was expecting a gross income of RM18.64bil and a net income of RM15.18bil with a return on assets of about 6.1%.
According to group chairman Tan Sri Abdul Wahid Omar, PNB has been able to deliver consistent returns to its unitholders, with over RM136bil having been paid out since its inception 38 years ago.
PNB is currently the market leader in the local unit trust industry, managing RM220bil in unit trust assets with 12.8 million accounts, representing over a 60% market share in terms of total fund value.
PNB also expects the dividend payout this year to be maintained, said Wahid as he unveiled PNB’s Strategic Plan 2017-2022 yesterday.
Meanwhile, PNB president and group CEO Datuk Abdul Rahman Ahmad said PNB recognised the challenges ahead in the period of global uncertainty, given the flat global economic growth and low interest-rate environment.
“This is exacerbated further by the negative trend of the FBM KLCI for the past three consecutive years attributed by the weak shareholders’ return of large-cap Malaysian corporates over the period,” he added.
PNB is a major investor in Bursa Malaysia with investments of nearly RM170bil or 10% of the market capitalisation of the bourse.
Its strategic holdings are in Malayan Banking Bhd (Maybank), Sime Darby Bhd, UMW Holdings Bhd, S P Setia Bhd, Chemical Company of Malaysia Bhd and MNRB Holdings Bhd.
It also has sizeable stakes of more than 10% in large caps such as Axiata Group Bhd, Tenaga Nasional Bhd, CIMB Group Holdings Bhd and Telekom Malaysia Bhd.
To counter the challenges ahead, Abdul Rahman said the PNB Strategic Plan 2017-2022 would chart the way forward for the group to deliver sustainable, consistent and market-leading returns.
However, he said that corporate Malaysia has to perform.
“Companies should not undertake mergers and acquisitions without enhancing shareholder value. Every single action that they take should create shareholder value,” he added.
To attain PNB’s vision to be a distinctive world-class investment house, PNB has formulated the Strive 15 programme which comprises three pillars – enhancing sustainable returns, effective investment management and driving operational excellence.
Abdul Rahman said: “We have developed a clear strategic plan to address current and future challenges, thus ensuring PNB can sustain its performance for the next six years and beyond.”
He pointed out that PNB would continue to invest in high-performing Malaysian corporates.
“Our cash is sizeable and we will continue to invest whenever the opportunity arises, including in fixed income when the time is right.”
At the moment, out of PNB’s investment portfolio, the cash position is about 20% and fixed income is 4%.
A 20% cash holding is about RM50bil in terms of absolute amount.
Towards this end, Abdul Rahman said that it would be redeploying some assets to reduce its cash position when the opportunity arises.
“We think that while it is important to hold cash, RM50bil is a bit too much,” he said.
Wahid added that there were a lot of things that could be done and achieved with PNB’s existing strategic investments.
“We will work closely with the management and board of our strategic investment companies to see how we can further maximise returns and create more value for these companies,” said Wahid.
Recently, there was a news report of a break-up of Sime Darby, the conglomerate in which PNB has close to a 55% controlling stake.
Spculation has been rife that both Wahid and Abdul Rahman were keen on seeing the board of Sime Darby come up with a plan to unlock value by having more individually listed entities as opposed to a single public-listed parent holding an array of different businesses.
On PNB’s cash position, Abdul Rahman said that the current cash position of 20% of total assets was definitely not optimal and that PNB would be looking to deploy those monies to work soon.
“We will source for new strategic investments and core portfolio companies. Private equity and fixed income will be another asset class that we are looking to increase exposure to,” said Wahid.
“For now, given the weak ringgit, we will not move into acquiring global assets.”
Abdul Rahman, meanwhile, is bullish on the positive growth of PNB’s funds, given the lows in the earnings cycle, historically low foreign ownership and the fact that “not often the KLCI underperforms for three consecutive years”.
Read more at http://www.thestar.com.my/business/business-news/2016/11/25/pnb-unveils-strategic-plan/#EBFD7oRdWT4QIXlC.99
Hence, it is quite achievable that PNB increase its value by 34.6%, equivalent RM90 bil, from the current asset at RM260 bil to RM350 bil in six years.
The surplus of cash from the listing of two other Sime Darby groups is extra resource, to be realised in the optimisation of the existing market capitalisation of Sime Darby. Currently, it is hovering in the neighbourhood of RM62.8 bil.
Three years earlier, Some Darby set the target to bring the market cap to RM100 bil.
Monday, 9 June 2014 | MYT 6:00 PM
Sime Darby aims to double market cap to RM100bil by 2016
KUALA LUMPUR: Malaysia-based multinational conglomerate, Sime Darby Bhd, plans to almost double its market capitalisation to RM100bil on Bursa Malaysia by 2016 from RM57.73bil recorded to date.
In line with the five-year strategy blueprint for financial year 2012 until 2016, Sime Darby would continue to expand and strengthen its position in diversified business activities such as plantation, industrial, motor, property and energy and utilities.
Executive Vice-President Group Strategy and Business Development Alan Hamzah Sendut said from the financial perspective, the company has recorded a lower financial result due to volatility in global commodity prices.
Sime Darby’s profit before interest and tax for the nine-month period ended Mar 31, 2014 slipped 16% to RM2.922bil from RM3.478bil recorded in the same period last year.
“However, our production (palm oil) is increasing, and volatility in the crude palm oil prices is beyond our control,” he told reporters on the sidelines of Invest Malaysia 2014.
Alan also said the company has outlined strategic thrusts for each of the division under the group.
“For the plantation division, we will be looking at land bank expansion. We are looking for opportunities to acquire land outside Malaysia,” he added.
Sime Darby Bhd registered a pre-tax profit of RM1bil in its third quarter ended March 31, 2014 compared with RM934.74mil registered in the same period a year earlier.
The group, however, posted a lower revenue of RM10.295bil for the quarter compared with RM10.84bil in the same period last year, while earnings per share was higher at 14.09 sen against 11.5 sen previously.
The conglomerate attributed the quarter’s higher profit to improved results from the plantation division and a lower effective tax rate. – Bernama
Read more at http://www.thestar.com.my/business/business-news/2014/06/09/sime-darby-seeks-to-almost-double-market-cap-to-rm100-bln-by-2016/#IdHplLtjU7BjC7vR.99
The global financial crisis hitting at the end of 2014 and all throughout 2015 set the target back. In all, market cap of company listed in Bursa Malaysia saw an unprecedented reduction in value, despite the fundamentals such as operations and NTA are still encouraging.
Needless, this corporate move is extending the expansion of the Bumiputra Economic Agenda as part of the nation’s high income economy, which Prime Minister Dato’ Sri Mohd. Najib Tun Razak first assured the Malays in 2013.
It is a good start for the year of the Fire Cock.