KUALA LUMPUR (Sept 26): Analysts are positive on Sime Darby Bhd's stock on potential special dividends from disposal of its non-core assets, among others. This follows the latest sale of 1,282 acres of its Malaysia Vision Valley (MVV) land in Labu, Negeri Sembilan to NS Corp, a state statutory body, for RM445 million or RM8 per sq ft (psf).

The latest transaction comes shortly after Sime Darby announced the sale of 1,382 acres of its MVV land last month, also to NS Corp, for RM460 million or RM7.64 psf.

At 11.57am on Monday (Sept 26), shares of Sime Darby were up one sen or 0.46%, bringing it a market capitalisation of RM14.78 billion. Its share price has fallen 5.65% since the beginning of the year.

Sime Darby has in recent years been progressively divesting its non-core assets as part of its five-year value creation plan to streamline its portfolio and redeploy capital to put a sharper focus on its core industrial and automotive businesses.

Since acquiring 8,796 acres of MVV land from Sime Darby Plantation Bhd in 2017 as part of the larger Sime Darby Group’s demerger exercise, Sime Darby has undergone three transactions to sell its MVV land. In October last year, it sold 760 acres of its land in MVV to Sime Darby Property Bhd for RM280 million. With the latest two disposals totalling 2,664 acres of its MVV land, it now has about 5,372 acres left to dispose of.

According to RHB Research analyst Jim Lim Khai Xhiang, it is understood that Sime Darby is still in talks with more interested parties to sell the remaining 5,372 acres of its MVV land.

"Its recent sales (in relation to the 2,664 acres to NS Corp), at 19% above cost, will fetch RM905 million, which Sime Darby can use for investments, dividends, working capital and repaying debt. Sime Darby is expected to record net gains (including the reversal of consolidation adjustments) of RM399 million and RM412 million, totalling RM811 million, upon completion of the sales in the finanical year ending Dec 31, 2024 (FY24)," he said in a report on Monday.

Lim has a "buy" call on Sime Darby, with a higher target price of RM2.75 from RM2.55 previously, as he likes the stock for its dividend yield, resilient Australasia industrial segment, potential special dividends from disposal of its non-core assets, and growing fleet of electric vehicle offerings.

Kenanga Research analyst Wan Mustaqim Wan Ab Aziz is also maintaining an "outperform" call on Sime Darby, with a target price of RM2.60.

"We like the stock for the robust growth of its core business operation riding on economic recovery; and major brands under its stable such as BMW and Caterpillar, thus ensuring sustainable profit growth. The stock also offers an attractive dividend yield of more than 5%," he wrote in a report.

Wan Mustaqim estimates that the disposal will result in a one-off gain of RM412 million for Sime Darby. "The exercise is slightly earnings accretive. The interest savings from the proceeds will boost its FY24 earnings by 2%. The proceeds will also reduce Sime Darby’s net gearing to 0.22 times from 0.23 times," he said.