Sime's standing unaffected by mergers

KUALA LUMPUR: Sime Darby Property Bhd, the property arm of Sime Darby Bhd, is best known for its size as the property developer with the largest landbank in the country.

The Synergy Drive merger of 2007, which brought together Sime Darby Bhd, Kumpulan Guthrie Bhd and Golden Hope Plantations Bhd to create the largest listed plantation player in the world, also created one of the largest property groups in Malaysia.

Prior to the merger, Sime UEP Properties Bhd was already a major player in the property sector.

Sime Darby Property has an undeveloped landbank of 37,000 acres, as well as 126,000 acres in Sime Darby Vision Valley, of which 80,000 acres will be developed over the next 25 years generating gross development value of RM30 billion.

Aside from size, it also trumped in terms of sales, selling over RM1 billion worth of properties in FY09, thanks to Sime Darby's Parade of Homes campaign which saw the property developer selling 1,600 units of homes within three months.

Property development contributed 83% of the property arm's profit before interest and tax with the balance coming from segments such as asset management and hospitality.

Where does the slew of mergers in the property sector leave Sime Darby Property?

The landbank of the three merged groups — even when combined — is still nowhere near Sime's.

An observer in the industry said Sime Darby Property is big enough on its own with sufficient resources and landbank to keep it busy for a while.

"I think these have worked well for Sime and as long as it consistently delivers in terms of sales and profitability, it should maintain its pole position," he said.

The division is the third largest earnings contributor for the Sime Darby group at 24%, after the plantation and industrial divisions in FY10.

Talks of plans to list the group's various divisions have intensified following the emergence of massive losses at the conglomerate's energy and utilities division. In FY10, the unit provided for foreseeable losses to the tune of RM2.1 billion.

The group has said that it is considering selling some of its business units. It is not clear if this includes the property arm although those familiar with the group said this is unlikely.

This article appears in the Nov 29 edition of The Edge Financial Daily.