Liberia plantation sale to help Sime Darby Plantation focus on profitable ventures

By SHAZNI ONG / Pic By BLOOMBERG

SIME Darby Plantation Bhd’s (SDP) sale of its loss-making Liberian operations is a positive development as it will allow the plantation firm to focus on its core assets in Malaysia, Rakuten Trade Sdn Bhd VP for research Vincent Lau said.

“The divestment will bring back funds that can be redeployed at their profitable business and stop the red ink for their Liberia assets.

“SDP could possibly book gain from the disposal if the asset has been written down over the years and the market has reacted positively on the news,” he told The Malaysian Reserve.

The sale of the group’s Liberian operations is part of SDP’s focus to monetise its non-core and loss-making assets, he added.

Kenanga Investment Bank Bhd (Kenanga IB) said the disposal will be positive for the firm, given that its Liberia plantation assets have been netting losses for a long time.

“The intended sale has been well publicised and as the asset has been progressively written down in the past, it should not incur any material negative extraordinary items,” Kenanga IB stated.

The firm has a ‘Market Perform’ call and a target price of RM5 on SDP.

Shares of SDP closed 0.4% higher at RM5.30 yesterday, valuing the company at RM36.49 billion.

The group last Friday told Bursa Malaysia its board of directors has approved the divestment of the company’s entire stake in Sime Darby Plantation Liberia Inc (SDPL) to Mano Palm Oil Industries Ltd (MPOI). The price was not disclosed.

It said the decision was part of the company’s current asset monetisation exercise, which includes the divestment of underperforming assets or assets that have achieved its full value potential for disposal.

“SDP would also like to confirm that the government of Liberia has consented to the divestment of SDPL’s shares to MPOI.

“SDP is currently working together with MPOI to finalise the terms and conditions of this divestment exercise via a sale and purchase agreement which is targeted to be signed by the end of 2019,” it said.

The transaction is expected to be completed in the first quarter (1Q) of 2020. The divestment comes after a Reuters report last Friday, quoting a Liberian minister as saying that SDP would be selling its Liberian operations to MPOI’s subsidiary, Mano Manufacturing Co.

The Liberian operations involved a 63-year concession signed in 2009 for 220,000ha of land in the northwestern region into oil palm and rubber plantations, constituting a fifth of its global land holdings.

SDP net profit fell to RM32 million in the 3Q ended Sept 30, 2019, from RM126 million a year ago, impacted partly by higher impairment charges for its assets in Liberia.

Its Liberian operations reported a higher loss of RM311 million compared to RM158 million a year ago due to the impairment charges on the assets worth RM256 million.