PETALING JAYA (Aug 27): Given its “lazy balance sheet”, Sime Darby Bhd intends to borrow more to fund its acquisition trail, particularly in the auto sector in China and Australia, according to its group chief financial officer Mustamir Mohamad.

Speaking to reporters during its full year of financial year ended June 30, 2019 (FY19) results briefing here today, Mustamir revealed that the group is planning to increase its gearing up to 0.6 times in the next few years from the current 0.3 times, which is deemed low.

To put things into perspective, following the acquisition of Gough Group, Sime Darby has room to raise its gearing up to 0.27 times, which would enable the group to make acquisitions worth some RM2.34 billion. As at June 30, 2019, Sime Darby’s total borrowings stood at RM2.6 billion.

“Currently we are considered to have very low gearing and the 50% to 60% [gearing level] is considered healthy. [This level is determined] after engaging with investment bankers to come out with an optimal capital structure,” said Mustamir.

Asked if there is a time frame to gear up to 0.6 times, Mustamir said it will depend on the acquisitions in the next three to four years.

“We are looking to undertake more acquisitions in the motor space, and that will be from Australia and China,” said Mustamir.

Its group chief executive officer Datuk Jeffri Salim Davidson confirmed that Sime Darby has bid for Columbia Asia group’s healthcare business. When asked if there are any other acquisitions that the company is eyeing, Jeffri said: “We have some other things that we are looking at, when it happens we will announce it.”

Post acquisition of New Zealand’s Gough Group Ltd, Mustamir said, the company’s gearing will become 0.33 times from 0.3 times.

He added that the company will not be looking at more Caterpillar dealerships after the NZ$221 million (RM600 million) acquisition in Gough Group.

Noting that the acquisition in New Zealand is expected to be complete by Sept 30, Mustamir said Gough Group is anticipated to contribute over RM1 billion to its revenue annually.

For its capital expenditure (capex), Sime Darby has set aside over RM1 billion in FY20, which will be used for its motor division, showroom upgrades and extension to Sime Darby’s assembly plant, among others. Parts of its capex will be used for maintenance works in its industrial business and logistics business, said Mustamir.

On its divestment plans, Mustamir said Sime Darby is planning to sell some of its non-core businesses, including the insurance business, retail business, as well as its stake in property developer Eastern & Oriental Bhd.

Shares of Sime Darby closed two sen or 0.96% higher at RM2.11 today, valuing the company at RM14.21 billion.