RM1.49bil Australian acquisition enables Sime Darby to diversify away from coal markets?

KUALA LUMPUR: Sime Darby Bhd's acquisition of Cavpower Group may eventually help it to diversify away from coal markets to critical materials like copper, lithium and cobalt in South Australia, said Public Investment Bank Bhd (PublicInvest).

PublicInvest is positive about the acquisition as it complements Sime Darby's existing portfolio and allows it to pivot into infrastructure and commodities in Australia.

The firm said Sime Darby's industrial division is poised to geographically expand into the South Australian market after the acquisition.

In terms of financial impact, PublicInvest said the acquisition will set the company's gearing to increase from 0.31x to 0.40x.

"Based on our preliminary estimates, the proposed acquisition could lead to about two to three per cent increase to our financial year 2024 to 2025 (FY24 - 25F) earnings forecast, after taking into account the additional funding cost from external borrowings," it said.

To strengthen the company's industrial division's dealership footprint, Sime Darby yesterday announced its acquisition of Cavpower for A$500 million (RM1.49 billion).

Cavpower is a Caterpillar Inc (CAT) dealership based in Adelaide, South Australia.

It mainly serves the mining, construction, energy and transportation industries with employees of more than 450 people through nine branches on a hub and spoke model that sells CAT equipment, parts, service and technology solutions.

The firm said the acquisition was done on a cash-free and debt-free basis.

PublicInvest maintained its "Neutral" call on the company with a target price of RM2.37.

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