Sime Darby to review investment-grade rating after demerger exercise

KUALA LUMPUR (Nov 20): Sime Darby Bhd will review its investment-grade rating after spinning off its cash-generating plantation and property units, which will be separately listed on Bursa Malaysia on Nov 30.

The review is also pertinent as the group does not have any sukuk programme that would seem to retain its investment-grade rating, said group chief financial officer Datuk Tong Poh Keow.

On Oct 31, Moody’s Investors Service downgraded the issuer rating for Sime Darby to Baa3 from Baa1, with a stable rating outlook.

Moody’s said the downgrade reflects a significant reduction in Sime Darby’s scale and cash flow, and in particular, a weakening in its business profile, because it can no longer benefit from the diversification afforded by its plantation and property businesses, which are more profitable than the rest of its operations.

Tong said Sime Darby is well-prepared for the rating reviews by rating agencies, and that it is still has an investment-grade rating.

She dismissed the downgrade as having a negative impact as Moody’s previously ascribed the rating on Sime Darby as a conglomerate but that the structure and composition has changed now.

The rating for the plantation unit is similar to that of the group’s when it first went into rating, Tong told reporters after the group’s annual and extraordinary general meetings.

She said the rating agencies have their own criteria for business models and financial matrix.

“However, we will review the necessity of doing that rating going forward. The rating agencies look at two things — financial matrix and business operations.

“For us to look at it was that the rating that was done for Sime Darby was for a purpose which was when we issued a multi-currency sukuk in the capital market but we don’t have any capital market programmes now,” she added.

Tong said the necessity to do a capital market programme or maintain it is subject to a decision by the new management under chairman Tan Sri Wan Abdul Aziz Wan Abdullah, and group president and group chief executive Jeffri Salim Davidson.

Meanwhile, Sime Darby shareholders passed the resolutions on the pure play listings of Sime Darby Plantation Bhd (SD Plantation) and Sime Darby Property Bhd (SD Property).

“All resolutions put forward were passed. It went well. We gave a lot of clarifications to shareholders particularly on valuation and how the exercise would be carried out. Voting results were more than 90% full,” Tong said.

The listing price for SD Plantation will range from between RM5.43 and RM6.15, from RM1.45 to RM1.72 for SD Property, and from RM1.18 to RM2.17 for Sime Darby.

Based on the illustrative listing reference prices, SD Plantation would have a market capitalisation ranging from RM36.93 billion to RM41.83 billion.

For SD Property, the range for market capitalisation will be RM9.86 billion to RM11.7 billion while Sime Darby’s market cap will be between RM8.03 billion and RM14.76 billion.

Sime Darby’s share price was up three sen or 0.33% at RM9, for a market capitalisation of RM61.14 billion. — theedgemarkets.com

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