Analysts are generally positive on Sime Darby entering into share sale agreements to dispose all stakes in Weifang Ports, China for a cash consideration of 1.9 billion yuan, or about RM1.3 billion.
KUCHING (July 5): Analysts are generally positive on Sime Darby Bhd (Sime Darby) entering into share sale agreements to dispose all stakes in Weifang Ports, China for a cash consideration of 1.9 billion yuan, or about RM1.3 billion.
Hong Leong Investment Bank Bhd (HLIB Research) was overall positive on the announcement, as the group stays focused on its industrial and motor segments and exits non-core assets.
“We are overall positive on the disposal exercise, in line with Sime Darby’s long term strategy of disposing its non-core assets while expanding its core segments of industrial equipment and motor.
“The group is expected to recognise a net gain of circa RM35 million from the disposal exercise (expecting impairments of RM60 million to RM70 million, netting with forex gain of circa RM100 million in coming quarters).
“The next large non-core asset in Sime Darby’s book is the MVV lands, measuring circa 8,000 acres with a value of circa RM3 billion (based on previous transacted price to Sime Darby Property).
“Sime Darby is also currently in talk with IHH for the disposal of its 50 per cent JV stake in Ramsay Sime Darby Hospital, valued at US$1.35 billion (RM5.9 billion) for 100 per cent stake.”
Maybank Investment Bank Bhd (Maybank IB Research) was equally positive on this deal from financial and operational standpoints.
“The deal, transacted at 0.98 times of book value, will see Sime Darby realising a gain of an estimated RM35 million. The financials of Weifang Port relative to the group’s is negligible, which makes this exit sensible and strategic,” it said in its own notes.
“Business-wise, the ports business in China is highly competitive and requires large capex to maintain the port’s infrastructure.
“Overall, this divestment marks Sime’s full exit from the non-core ports business.”
As the exercise is expected to be completed by the final quarter of 2022, AmInvestment Bank Bhd (AmInvestment Bank) said the earnings contribution from the operation will be deconsolidated starting 3QFY23.
“We are generally neutral on this exercise. The divestment of the Weifang Port business is not unexpected and in line with Sime Darby’s portfolio rebalancing efforts.
“The group has been monetising its non-core assets and will reallocate the proceeds by reinvesting in its core businesses i.e. the motors and industrial divisions for higher returns on investment.