This article first appeared in The Edge Financial Daily on November 13, 2019 - November 19, 2019

KUALA LUMPUR: Sime Darby Bhd is looking at trimming its non-core assets, even though it is not in a hurry to do so, as part of its five-year plan to create value for the group two years after its demerger exercise.

Its group chief executive officer (CEO) Datuk Jeffri Salim Davidson said the group had seen good progress in its non-core asset rationalisation plan, with some divestment exercises completed in the financial year ended June 30, 2019 (FY19).

These include the disposal of Weifang Sime Darby Water Management Co Ltd and Sime Darby Global Service Centre, as well as exiting Fiat and Alfa Romeo in Australia.

“We have been quite clear in our direction of divesting our non-core assets. However, we are not in an urgent position to sell. We will continue to explore our options and divest when time and valuations are optimum,” he told Bernama in an interview recently.

Sime Darby’s non-core assets include a 12% stake in Eastern & Oriental Bhd, 3,561ha in the Malaysia Vision Valley in Negeri Sembilan and a 30% stake in Tesco Malaysia.

“When the land in Malaysia Vision Valley gets developed, we will eventually divest it when it becomes more developed around there,” said Jeffri.

The much-anticipated demerger of the Sime Darby group was completed on Nov 10, 2017, with the separate listing of three entities, breaking one of the country’s largest conglomerates into pure-plays and allowing the individual businesses to measure up against similar peers.

Sime Darby now focuses on the industrial, motors and healthcare sectors. The group is one of the largest BMW and Caterpillar dealers in the world.

“The demerger has enabled Sime Darby to chart our own path and focus on our core trading businesses of motors and industrial (equipment), as well as healthcare, which is still relatively small but we are looking to grow it,” said Jeffri.

He noted that the group had set out its strategy for the next five years via a five-year Value Creation Plan focusing on several areas, including revenue enhancement, cost optimisation, monetisation of non-core assets, synergistic merger and acquisition, and expansion of the healthcare division.

Jeffri said Sime Darby would need to grow its business organically and via acquisitions, with continuous focus on Asia-Pacific.

“We have got a war chest in a sense. We have the opportunity to buy when people are trying to sell (but) it all depends on the valuation ultimately,” he noted.

Sime Darby had already invested RM1 billion in the current financial year ending FY20 for the acquisition of Gough Group Ltd and three Trivett dealerships in Australia.

Jeffri said the Gough Group’s acquisition was particularly appealing as Caterpillar dealerships did not come up for sale very often and it also spoke volumes about Sime Darby’s track record and relationship with Caterpillar.

He noted that the acquisitions were more significant as the market has been relatively quiet this year in terms of merger and acquisition.

“We want to spend time bedding down the two acquisitions to ensure that they are well integrated into our system. Apart from these acquisitions, we continue to look at opportunities in industrial and motors,” he said.

He added that Sime Darby was also exploring organic expansion into adjacent businesses such as vehicle assembly, asset management and rental solutions to broaden its earnings base and increase its recurring income profile.

On whether the group plans to expand its healthcare business in the current financial year, Jeffri said Sime Darby is not in a rush.

“We are looking for acquisitions in the healthcare space, but everybody is looking for acquisitions and the price now, in our view, is high. For every hospital you look at, there are five other people looking at it, and it tends to move the price up.

“We try and draw a line. We do not want to overpay for things,” he said.

Sime Darby has a 50:50 joint venture with Ramsay Healthcare in the management of hospitals and provision of healthcare services. Via the joint venture, Sime Darby has three hospitals each in Malaysia and Indonesia, as well as a day surgery centre in Hong Kong which was set up in FY19. The group has been involved in the healthcare sector since 1985. — Bernama