Newly listed Sime Darby members make soft debut after demerger exercise

TheEdge Thu, Nov 30, 2017 01:06pm - 3 years ago

KUALA LUMPUR (Nov 30): The pure-play strategy for Sime Darby Bhd has eroded the value of its investors’ portfolio by 3.8% on the first trading day, post the demerger of its plantation and property divisions, as the newly-listed entities, Sime Darby Plantation Bhd (SDPlant) and Sime Darby Property Bhd (SDP), both fell by 10.4% and 20% respectively. This was despite Sime Darby Bhd’s share price surging by 29.2%.

To put into perspective, an investor who held 10,000 units of Sime Darby on Nov 24, the last trading day of Sime Darby shares before the implementation of the distribution, would have an unrealised loss of about RM3,400 in their investment portfolio by noon today.

As of 12.30pm, Sime Darby was trading at RM2.39, with about 64.0 million shares exchanging hands.

For SDPlant, its share price was at RM5.01, with 11.1 million shares exchanging hands, while SDP saw its share price close at RM1.20 by noon break, with 19.5 million shares traded.

“The sentiment surrounding both the property and plantation segment is quite negative at the moment and has impacted both the plantation and property counters. If you look at the earnings results, most of the plantation counters have underperform. As for the property sector, there remains a lot of concern on the overhang, oversupply and mismatched of the properties in the country,” Vincent Lau, Rakuten Trade Sdn Bhd’s vice president, told

Lau however, reckoned that things should normalise for SDPlant and SDP, as both of them are key players in their respective sectors.

Meanwhile, Affin Hwang Investment Bank highlighted that the residual method for reference pricing for Sime Darby after the demerger exercise is RM1.85, which is at an undemanding valuation of 15.5 times of its price-earnings ratio, based on expected financial performance in financial year 2018.

An analyst who wished to remain anonymous agreed that the valuation seems lower than it should be for Sime Darby, creating a buying opportunity that has led to a surge in its share price.

As for the listing reference price for SDPlant and SDP shares, they had been pegged at RM5.59 and RM1.50 respectively, based on the allocation range of 60% to 68% for SDPlant, and a range of 16% to 19% for SDP, as set out in the circular to shareholders of Sime Darby Bhd on Nov 4, as well as the closing price of RM8.94 on Nov 24.

The pure-play strategy was intended to unlock sustainable value for Sime Darby’s investors through the listings of SDPlant and SDP as separate entities from the holding company Sime Darby. The demerger will allow the three entities to focus on expanding their respective businesses, transportation and logistics for Sime Darby, plantation for SDPlant, and property development and investment for SDP. 

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