KUALA LUMPUR: OSK Investment Research sees the tie up between Sime Darby Property and Sunrise Bhd as a brilliant strategic move.

Sime Darby had entered into a 50:50 JV with Sunrise (Neutral, TP RM2.29) to develop 3 plots of freehold commercial land measuring 20.95 acres in the 180-acre Bukit Jelutong (Shah Alam) with an estimated GDV of RM1 billion, to be developed over a period of seven years

“While profit contribution is negligible, we think the JV with Sunrise is a brilliant strategic move by Sime Darby because despite being the largest property developer in the country, Sime Darby is known as a township developer and has no reach in the high-end segment.

“The JV will thus allow it to tap into Sunrise’s expertise in the segment and fast-track its rebranding exercise,” it said on Wednesday, Jan 27.

OSK Research said with an estimated GDV of RM1bn, the upcoming JV project will comprise integrated retail, shop offices, office suites and service apartments with a total gross built-up of about 2.7m sq ft, which will be developed in five phases over a period seven  years, starting from 2011. However, approvals for the project’s development order have yet to be obtained.

However, as for Sime Darby it said the property development segment is a relatively small contributor to Sime Darby’s earnings, making up 14% of its FY09 EBIT.

“We make no change to our earnings forecast. Our Sell call is premised on the stock’s expensive valuation, as it is trading at a forward PE of 19 times,” it said.

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