Sime Darby Bhd (May 8, RM9.32)
Maintain outperform call with an unchanged target price (TP) of RM9.89: Sime Darby Bhd’s property unit, Kumpulan Wang Persaraan (Diperbadankan) (KWAP) and Brunsfield Development Sdn Bhd signed a memorandum of understanding (MoU) late last week to lead the development of Malaysia Vision Valley (MVV).
The large-scale long-term project, a key development in Negeri Sembilan announced during the Budget 2016 speech, covers an area of over 153,000ha that encompasses Nilai, Seremban and Port Dickson. It is expected to attract total investments of RM290 billion by 2045, create 1.38 million new jobs, and help generate an economic growth of between 6.2% and 7.3%.
Through the MoU, Sime Darby Property, Brunsfield Development and KWAP will explore the opportunity to develop the first phase of the development in the area comprising 11,000ha of land.
It will focus on four key development drivers: high-tech manufacturing, tourism, skill-based education and research and specialised services. To improve the infrastructure, there are plans to upgrade roads from Kuala Lumpur International Airport to Telok Kemang, Port Dickson, at a cost of RM260 million, the construction of new roads from Nilai to Bandar Enstek (RM200 million), the construction of an alternative road from the new Seremban toll plaza to the Seremban Middle Ring Road (RM90 million). There will be a 2,440ha manufacturing zone catering to various industries.
Among developments that have been mooted for MVV include Seremban Central, Seremban Resort City, Port Dickson Waterfront, Port Dickson Splash Park and affordable housing schemes. Seremban is tipped to be the central business district, while the Nilai-Enstek-Sendayan area will become an education and sports cluster.
Negeri Sembilan will also be boosted by being part of the Kuala Lumpur-Singapore High-Speed Rail project, which is expected to be completed by 2026. Both residential and commercial property developments are expected to gain from the presence of a station in Seremban.
The 30-year project is expected to unlock the potential value of Sime Darby’s 22,258ha land bank currently sited in this major strategic development region. It will also help give an immediate boost to its existing residential property developments in Nilai Impian and Bandar Ainsdale.
As Sime Darby’s property unit is on course for a public listing in Malaysia, we believe this major project will be one of the key catalysts to drive the company’s valuation going forward.
We maintain our “outperform” call on Sime Darby with an unchanged TP of RM9.89. — PublicInvest Research, May 8
This article first appeared in The Edge Financial Daily, on May 9, 2017.