Friday 29 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily, on June 27, 2016.

 

KUALA LUMPUR: Sime Darby Bhd said last Friday that the results of the UK’s referendum to exit the European Union (EU) will not impact the viability of the Battersea Power Station project.

Reiterating its long-term commitment as a shareholder of the Battersea Power Station project, the government-linked conglomerate said the project will continue to generate interest in the longer term.

“We are confident [that] the iconic development will continue to generate interest in the longer term,” the group said in a statement.

“Sime Darby is confident that London will continue to remain a key investment destination and financial centre,” it added.

In an unprecedented move, UK voters polled for the country to leave the EU, with 52% or 17.41 million voters commanding the winning decision. A total of 48% or 16.14 million voters chose to stay in the EU. Voter turnout was 72.16%.

The “Leave” decision has prompted UK Prime Minister David Cameron to resign, while sending the British pound plunging to levels not seen since 1985 (1.3240 against the US dollar), as well as causing markets across the Asian region to roil.

The UK’s FTSE 100 Index saw £100 billion (RM560.22 billion) wiped off as investors fled risky assets, after tumbling more than 8% within the first few minutes of trading — its biggest fall since the collapse of US investment bank Lehman Brothers in 2008, The Guardian reported.

In a note last Friday, Maybank IB Research said a weaker pound should result in lower ringgit-denominated profits from the foreign-exchange impact and margins, which will impact Sime Darby’s profit margins.

“Based on our sensitivity analysis, a 10% weakness in the [pound-ringgit rate] from our base case would impact our financial year 2017 net profit estimates for S P Setia Bhd/Sime Darby by 3.5%/1.1%, [and] our revalued net asset value estimates by 1.5%/less than 1%,” the note read.

The research firm also said a potentially slower UK economy could affect future take-up rates of Battersea Power Station, but noted that the project had locked in sizeable sales (which have yet to be recognised), totalling £1.6 billion or 18.3% of its total project gross development value (GDV).

The Battersea Power Station regeneration project, with an estimated GDV of £10 billion, involves the redevelopment of London’s iconic Battersea Power Station.

Sime Darby and S P Setia have also jointly invested in the project with a 40% stake each, while the Employees Provident Fund owns the remaining 20%.

The project sees the development of residences, parks and commercial areas at the site of the decommissioned coal-fired power station located on the south bank of the River Thames in Nine Elms.

      Print
      Text Size
      Share