KUALA LUMPUR (Jan 27): Sime Darby Bhd plans to create three pure play stand-alone businesses in the plantation, property and trading and logistics sectors, by floating the shares in its plantation and property arms, while retaining its trading and logistics business under the current listed entity.
The group, whose share price gained 12 sen to settle at RM8.82 yesterday for a market capitalisation of RM60 billion, said the plan would enable each business segment to pursue their objectives, with greater focus and agility to maximise value for all shareholders.
The planned listing of its plantation arm confirms a report by The Edge Malaysia weekly, which wrote in its publication for the week of Jan 23 to Jan 29 that Sime Darby was hiring advisers to list the business in the second half of this year as the first step to a wider demerger strategy.
In a statement yesterday, Sime Darby said it will be evaluating the implementation measures and indicative timelines, adding that the company will make the appropriate disclosures upon receiving the board’s final approval.
“The board’s decision is the crucial next step we must take, in order to achieve the original aspirations of the shareholders in 2007, when the new, enlarged Sime Darby was created with the merger of Golden Hope Plantations Bhd, Kumpulan Guthrie Bhd and Kumpulan Sime Darby Bhd,” said Sime Darby president and group chief executive officer Tan Sri Mohd Bakke Salleh.
He said each business will bear the Sime Darby name in order to carry on the heritage, since the conglomerate’s listing in 1980. He highlighted that Kumpulan Sime Darby was mandated to develop Malaysian champions by incubating key businesses in key growth sectors.
“Once businesses had achieved critical size and capacity, they were spun off and listed on the stock market. Not only did this benefit shareholders, it allowed the companies to tap into the capital market for growth. The merger in 2007 renewed this mandate.
“Today, nine years after the merger and several strategic corporate exercises to position our businesses, we are ready to execute the original intention of our shareholders. Each division is now stronger, strategically structured and better equipped to stand alone and be listed as pure plays,” said Mohd Bakke.
The group said Sime Darby Plantation Bhd (currently Sime Darby Plantation Sdn Bhd) has since 2007 seen its landbank grow from 633,000ha to 988,599ha, with planted hectarage of 603,254ha, compared with 540,000ha a decade ago, making it the largest oil palm plantation company in the world.
Sime Darby Plantation’s downstream unit has also been restructured from a loss-making unit in 2007, into a profitable and steadily growing business, with a total of 11 refineries.
“Upon the strong foundation we have reinforced in the upstream sector, Sime Darby Plantation has positioned itself to become a major player in the downstream sector, fulfilling the aspirations at the time of the merger, to create the world’s leading integrated plantation company,” said Mohd Bakke.
Meanwhile, Sime Darby Property Bhd has evolved into an integrated developer, with access to some of the most strategic land banks in Malaysia. It is also positioned to benefit from future developments by the government, especially in areas around the Malaysia Vision Valley, Carey Island and the high-speed rail link.
“After the listing of Sime Darby Plantation and Sime Darby Property, Sime Darby Bhd will be a more focused company, with the steady businesses of Sime Darby Industrial and Sime Darby Motors anchoring its future growth, while the Logistics and Healthcare Divisions will offer exciting opportunities in the future,” said the conglomerate.
The group said Sime Darby Industrial’s revenue stood at RM9.6 billion, compared with RM7.2 billion in 2008, while total assets grew to RM9.3 billion, from RM4.5 billion over the nine-year period. Sime Darby Industrial is also exploring new opportunities in new energy solutions, and expansion opportunities in key geographies. As for Sime Darby Motors, that too has grown over the years and now deals with 28 marques in over 10 countries, compared with 17 at the time of the merger, while Sime Darby Logistics now operates five ports, with a total throughput of 30.3 million tonnes of general cargo.
“Sime Darby Bhd will continue to seek out growth opportunities in home markets and beyond. We’ve already identified new synergistic businesses of high potential to capitalise on the changing needs of our customers, and to fully realise the potential of our existing businesses. Shareholders will have much to look forward to,” added Mohd Bakke.
This article first appeared in The Edge Financial Daily, on Jan 27, 2017. Subscribe to The Edge Financial Daily here.