News Sime
Darby (SIME) and SP Setia (MP; TP: RM3.90) have issued a joint press release to
reveal that their joint bid have been identified as the preferred bidder for
the regeneration project of Battersea Power Station in London, UK by the Joint
Administrators and Receivers (JAR), Alan Bloom and Alan Hudson of Ernst &
Young LLP, which are acting on behalf of the owners of the Property. Both SIME
and SP Setia have entered into an Exclusivity Agreement with the JAR to acquire
the site for GBP400m (RM2.0b) and has up to 28 days to conduct further due
diligence and investigations. The Advisor for SP Setia and SIME is RREEF,
Deutsche Bank’s real estate arm.
Comments We are
NEUTRAL on the news pending more details from the management. However, our
property analyst thinks that the London property market is extremely attractive
as capital values are near, if not at trough levels.
Further details (e.g.
JV structure between SP Setia and Sime Darby, development details, etc) will
only be provided after the 28 days. There was no information on the project GDV
in the announcement. However, it was quoted in Starbiz that the GDV will reach
RM40b.
Outlook We are
still positive on the overall outlook for SIME as we look forward to a decent
7% FFB growth in FY13E.
The industrial
division should support the group’s earnings growth too after registering an
EBIT growth of 41% YoY to RM966m in 9M12.
Forecast Maintaining our FY12-13E net profits of
RM4.22bRM4.38b for now pending further details on the project.
Rating Maintain OUTPERFORM
The valuation of
13.0x FY13E PER is attractive as compared to IOI (15.5x) and KLK (17.0x). We
think the current discount above is unjustified given its status as the biggest
market cap planter with superior liquidity.
Valuation Maintaining Target Price of RM10.80. Our
valuation is based on Sum-Of-Parts with the Plantation division valued at 17.5x
Fwd PER.
Risks A
sustained decline in CPO prices.
Source: Kenanga
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