KUALA LUMPUR: Sime Darby Bhd, which saw its net profit for the second quarter of financial year 2015 (2QFY15) dip 47% to RM437.4 million from RM818.31 million a year ago, will defer the listing of its automotive arm to the second half of this year, said president and group chief executive Tan Sri Mohd Bakke Salleh.
He said the market is “not conducive” for a listing right now.
“For any listing, it has to achieve the best valuation,” he told reporters at Sime Darby’s (fundamental: 1.3; valuation: 1.3) media briefing yesterday on the 2QFY15 financial results.
It was reported earlier that the listing of Sime Darby’s automotive arm, which deals with brands such as Hyundai, BMW and Ford in the region, was scheduled for the first half of this year. It was said the initial public offering could raise about US$500 million (RM1.8 billion).
Mohd Bakke also said the group is exploring plans to monetise its Indonesian plantation business through listing, mergers or reverse takeover.
“We are working on it,” he said.
Sime Darby’s net profit fell 47% to RM437.4 million in 2Q ended December 2014 from RM818.31 million a year ago due to lower plantation, industrial, automotive and property income. Revenue, however, rose slightly to RM10.74 billion, from RM10.71 billion.
For the six-month period (1HFY15), Sime Darby’s net profit dropped 28.2% to RM938.09 million from RM1.31 billion a year ago, while revenue fell 2% to RM20.87 billion from RM21.29 billion in 1HFY14.
Despite weaker results, Sime Darby proposed an interim dividend of six sen for FY15 ending June 30, payable on May 8.
Bakke said 1HFY15 was challenging, as the sharp decline in crude oil prices and deceleration of global economic growth had resulted in the need for greater productivity and cost efficiency.
“The group’s portfolio of diversified businesses and stringent capital allocation will be crucial in carrying us through this volatility, and the focus is to strive to meet the targets under the key performance indicators (KPIs) that we set.
“We believe long-term market fundamentals remain attractive, despite the easing of commodity prices,” he said.
He sees crude palm oil trading at between RM2,300 and 2,500 per tonne in 2HFY15.
Sime Darby group chief financial officer Datuk Tong Poh Keow said the debt-equity ratio at 39.9% as at Dec 31, 2014 is expected to increase after the payment is done for the acquisition of New Britain Palm Oil Ltd (NBPOL).
The RM5.6 billion acquisition of NBPOL will be funded by debt (80%) and internal funds (20%).
She said the comfortable level of the group’s debt-equity ratio is from 35% to 45%, adding that the listing of its motor division and Indonesian plantation business would help to manage the group’s gearing level.
Tong also said about RM3.5 billion to RM4 billion have been allocated as capital expenditure for FY15, up from RM3 billion in FY14.
On news that Tan Sri Liew Kee Sin has tendered his resignation as the chairman of Battersea Project Holding Company Ltd (BPHC), Bakke said there was “nothing official” on this, denying that the board of BPHC has received Liew’s resignation letter.
Liew was quoted in a local news report as saying that he had tendered his resignation to BPHC, and was “waiting for a response” from the latter’s board.
Sime Darby holds a 40% stake in BPHC — the consortium that is undertaking the £8 billion (RM44.37 billion) Battersea Power Station redevelopment project in London. S P Setia Bhd (fundamental: 1.4; valuation: 1.2) and the Employees Provident Fund hold 40% and 20% stakes respectively in BPHC.
Sime Darby shares fell 13 sen or 1.4% to RM9.37 yesterday, giving it a market capitalisation of RM59 billion.
The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.
This article first appeared in The Edge Financial Daily, on February 27, 2015.