Thursday 28 Mar 2024
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KUALA LUMPUR (Feb 3): Conglomerate Sime Darby Bhd's plan to list its plantation and property businesses could lead to a weaker credit profile, according to Moody's Investors Service.

In a statement today, Moody's said it has placed on review for downgrade the Baa1 issuer rating of Sime Darby and Baa1 senior unsecured debt rating on the sukuk issued by Sime Darby Global Bhd (SDG) — a wholly-owned and guaranteed subsidiary of Sime Darby — following the announcement by Sime Darby that it plans to list its plantation and property businesses.

Moody's said that at the same time, it has placed on review for downgrade the (P)Baa1 rating on the senior unsecured medium-term note programme of SDG.

Moody's vice president and senior analyst, Jacintha Poh, said while there is no clarity on how the plan will be implemented, she believes the listing of Sime Darby's plantation and property businesses will lead to reduced diversification, scale and cash flows, and therefore a weaker credit profile.

Moody's said the review for downgrade will assess the specifics of the transaction, once the details of Sime Darby's plans are available.

The credit rating agency said it would focus on how existing debt will be allocated across the three entities, and the company's financial policy, capital structure, cash flow and liquidity profiles, as well as ongoing business prospects post the transaction.

It said the review will conclude once there is clarity on the transaction structure and certainty of the implementation.

"For the first quarter ended Sept 30, 2016, Sime Darby generated around 42% of its reported profit before interest and tax from its plantation segment, around 27% from property and the remaining from motors, industrial and other businesses," said Moody's.

At 12.30pm, Sime Darby rose 2 sen or 0.22% to RM9.06, with 3.38 million shares traded. It has a market capitalisation of RM61.62 billion.

 

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