KUALA LUMPUR: While Sime Darby Bhd’s proposed A$112 million (RM321 million) acquisition of three luxury car dealerships in Sydney will undoubtedly expand the group’s footprint in Australia, analysts do not expect the move to have a significant impact on its earnings.

The group has proposed the acquisition of the dealerships representing the BMW, MINI, Volkswagen, Jaguar and Land Rover marques from Trivett, the automotive retail unit of Inchcape Australia Ltd.

Kenanga Investment Bank analyst Wan Mustaqim Wan Ab Aziz said the acquisition is a net positive in terms of increasing sales volume, but does not expect it to have much impact on the group’s total earnings.

“Sales volume will grow, but in terms of contribution to the group, the acquisition will likely have a neutral effect. [The sales from the three dealerships] would likely account for less than 1% of Sime Darby’s annual sales and earnings.

“However, in terms of expansion, it is a positive move for the group,” he told The Edge Financial Daily.

Hong Leong Investment Bank Bhd analyst Daniel Wong said he does not expect the acquisition to have a significant impact on the group’s performance going forward.

“I can’t really say much in terms of numbers, since no details were given. Generally, I don’t expect the acquisition to contribute materially to the group,” Wong told The Edge Financial Daily.

He added that China is still the biggest market for the group’s auto business and pointed out that the business there is still facing compressed margins, coupled with pessimistic sentiment amid the ongoing trade war with the US.

For the financial year ended June 30, 2019 (FY19), Australia accounted for about 14% of the group’s motor division revenue, while China accounted for 43%, the biggest contributor among the markets Sime Darby is present in.

The group posted a 13% increase in net profit to RM184 million for the fourth quarter of FY19, from RM163 million in the previous year, while revenue grew to RM9.32 billion from RM8.58 billion.

For the full year, net profit stood at RM948 million, down 49% from RM1.92 billion in the previous year, while revenue increased 7% to RM36.16 billion from RM33.83 billion.

In a filing with the bourse yesterday, Sime Darby said the proposed acquisition involves the purchase of business assets and properties of the three luxury car dealerships, with definitive agreements entered into by its wholly-owned subsidiaries under Sime Darby Motors Sdn Bhd (SD Motors) and Trivett.

“The proposed acquisition is aligned to SD Motors’ strategy of expanding in the Australian retail luxury segment and will strengthen SD Motors’ presence and brand visibility in Parramatta, which is one of Sydney’s most recognised automotive retail locations,” said the group.

Sime Darby expects to complete the proposed acquisition by early December 2019, upon obtaining the relevant approvals, including written consent from the Foreign Investment Review Board of Australia as well as the brand principals.

Sime Darby’s share price fell two sen or 0.85% to close at RM2.32 yesterday, with a market capitalisation of RM15.78 billion.