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.