KUALA LUMPUR (March 14): Sime Darby Bhd’s decision to unlock value for its shareholders by breaking its conglomerate structure into three distinct pure play companies is a smart move, said Aberdeen Asset Management plc co-founder and chief executive officer (CEO) Martin Gilbert.
He said that from an investment management perspective, conglomerates are not a top pick due to their complexity when it comes to valuations.
“I am not a fan of conglomerates, because they are difficult to value and [hence] difficult to invest in. We would far rather invest in a pure play.
“[For example,] if we think crude palm oil prices are going to go up and we want to invest in a plantation company, it would be difficult for us to invest in Sime Darby [the conglomerate] as opposed to let’s say, United Plantations Bhd.
“Therefore, we think it was a very sensible move by Sime Darby to split itself into three pure plays,” he said at a news conference in conjunction with the Alice Smith-Chamber Brunch yesterday.
The conglomerate model, on a global scale, is also not as common as before, said Gilbert.
“I would say that globally we are not seeing the presence of the big conglomerates as before, and [instead] we are seeing a big split in conglomerates globally, such as with General Electric [Co] in the US.
“When people analyse conglomerates, they do the sum of the parts and say if you split it up, then it will be worth more than the [current] listing. I think Sime Darby has been very smart to do that,” he said.
Sime Darby announced on Feb 27 it would be spinning off its plantation and property businesses, by listing the two units separately as Sime Darby Plantation Bhd and Sime Darby Property Bhd on Bursa Malaysia, via share distribution to existing shareholders. The exercise is expected to take place early next year.
The group’s industrial, motors, logistics and other businesses will continue to be housed under Sime Darby.
Aberdeen Asset Management is a global asset manager with presence in 26 countries. As at Sep 30, 2016, the group’s total assets under management in Asia stood at US$79.1 billion.
“We have about US$3 billion (RM13.32 billion) from external money invested in Malaysia. We are bottom-up stock pickers, and we [see] some good value in the Malaysian market in terms of good, well-managed companies. We have stakes in companies like Public Bank Bhd and United Plantations,” he said.
Aberdeen Asset Management and its subsidiaries have a 11.7% stake in United Plantations and 1.73% in Public Bank.
Gilbert, who is also the deputy chairman of British broadcasting company Sky plc, was born in Malaysia and received his early education at the Alice Smith School here between 1961 and 1965. Together with fellow alumni Tune Hotels Group CEO of real estate and partnership Mark Lankester, he also shared his memories and experience at the school during the brunch.
This article first appeared in The Edge Financial Daily, on March 14, 2017.