KUALA LUMPUR (April 23): Shares of Sime Darby Bhd, which is expecting to pocket RM300 million cash from the sale of its 30% stake in Tesco Malaysia, climbed as much as 8.06% or 15 sen in the late morning trading session. 

At 3.15pm, the conglomerate's shares are trading at RM2.01, up 15 sen or 8.06%. Some 10.55 million shares were traded so far, which is 1.23 times over its 200-day average trading volume of 6.66 million shares.

In the past month alone, the stock has climbed 25.79% or 41 sen, reaching a month high today. However, on a year-to-date basis, the conglomerate is down by 9.91% or 22 sen.

Sime Darby will book in a hefty RM270 million divestment, which will in turn give a boost to its earnings. 

The group noted that proceeds from the disposal can be used for paring down borrowings, cash reserve, or special dividend (4.0 sen/share or yield of circa 2%), wrote Kenanga Research analyst Wan Mustaqim Wan Ab Aziz in his research note. 

Wan Mustaqim has maintained his “market perform” call and RM1.75 TP.

That said, AllianceDBS Research analyst Abdul Azim Muhthar opined that given the slower economic activity and movement control order implemented to contain the spread of Covid-19, he would not be surprised if at least a portion of the sale proceeds were retained to beef up its cash pile.

Abdul Azim has maintained his “fully valued” call with a TP of RM1.68.

According to its financial results for the second quarter ended Dec 31, 2019 (2QFY20), Sime Darby’s cash balance was at RM1.93 billion compared with total borrowings of RM3.75 billion. 

Sime Darby announced yesterday that it was selling its 30% stake in Tesco Stores (M) Sdn Bhd for RM300 million — resulting in a net disposal gain of RM270 million.

The move is part of a larger exercise between Tesco Plc and Thailand’s CP Group.

The UK supermarket and grocery retailer will sell its business in Thailand and Malaysia to CP for an enterprise value of US$10.6 billion (RM46.27 billion). 

Of the sixteen analysts that cover Sime Darby, nine have "buy" calls, four have "hold" calls and three have "sell" calls.

Sime Darby’s 12-month consensus TP stands at RM2.08. The range of TPs stands at RM2.78 to RM1.50.