Maybank IB: Proposed Carey Island port city development to benefit SD Guthrie, with land estimated to be worth RM7.1b

• SD Guthrie owns 11,000 hectares or about 85% of land in Carey Island. Assuming the unconverted agricultural land is valued at RM6 per square feet, it could be worth RM7.1 billion or 23% of its current market capitalisation, said the research firm in a note to investors dated Aug 11.

KUALA LUMPUR (Aug 12): The proposed development of a port city on Carey Island could significantly boost the land value of SD Guthrie Bhd (KL:SDG), formerly known as Sime Darby Plantation Bhd, over time to the tune of RM7.1 billion, according to Maybank Investment Bank (Maybank IB).

SD Guthrie owns 11,000 hectares or about 85% of land in Carey Island. Assuming the unconverted agricultural land is valued at RM6 per square feet, it could be worth RM7.1 billion or 23% of its current market capitalisation, said the research firm in a note to investors dated Aug 11.

“We believe the development of the proposed port city at Carey Island will require land and will boost SD Guthrie’s land value over time,” it added.

Maybank IB is maintaining its earnings forecast for SD Guthrie as the monetisation of the Carey Island land is expected to occur gradually. It has a “buy” call on the stock on 0.55 times realised net asset value, with a target price (TP) of RM4.96.

Out of the 18 analysts covering SD Guthrie, six have a “buy” rating, while 12 recommended a “hold”. The average TP was RM4.61, indicating a potential upside of 2.7% from Monday’s noon market break of RM4.49. At RM4.49 per share, SD Guthrie was valued at RM31.05 billion.

Over the weekend, The Edge Malaysia weekly reported that PKNS, the Selangor state economic development corporation, is planning to spearhead the development of Carey Island. PKNS is expected to take the lead on behalf of the Selangor state government.

The concession to develop and operate the port on Carey Island will require the winning bidder to form a joint venture with PKNS.

The multi-billion ringgit port development could start soon, if the target of getting it up and running by 2030 remains. Planned as a mega container port, the project is designed to handle 30 million TEUs (20-foot equivalent units) a year over four phases, and is scheduled for completion by 2060.

Once fully developed, the port will boast a total wharf length of approximately 16 kilometres (km), surpassing Westports’ 11km wharf length.

SD Guthrie’s stock has risen 2.75% so far this year.

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