Sime Darby to strengthen car dealership in China

Company constantly looks out for opportunities to establish more BMW dealerships in China’s biggest cities


SIME Darby Bhd plans to allocate over RM500 million in capital expenditure (capex) for the year ending June 30, 2021 (FY21), to strengthen its new car dealerships.

“Mostly will be deployed on car showrooms — new dealerships that we are actually able to get in China (Greenfield),” Sime Darby CFO Mustamir Mohamad told reporters in a virtual media briefing.

The capex is lower than the RM560 million capex it spent in FY20.

The conglomerate’s group CEO Datuk Jeffri Salim Davidson (picture) said the company constantly looks out for opportunities to establish more BMW dealerships in China’s biggest cities.

“From time to time, we get given certain areas in certain cities. For example, we opened up a new dealership in Chengdu. The capex we have will be used for new showrooms and land. It is not a cheap exercise.

“BMW is a very aspirational product for many middle-class for the Chinese people. Hence, there is more upside in this segment moving forward,” he said.

The group reported a net profit of RM281 million for the first quarter ended Sept 30, 2020 (1Q21), a 14.2% increase from 1Q20 on strong growth in the group’s motors division, particularly in China.

Revenue for the quarter was up 14.8% year-on-year to RM10.9 billion.

Jeffri said the group currently has no plans to dispose of any of its non-core assets due to poor market valuations due to Covid-19 pandemic.

“Timing is not the best at the moment as the market is slow and weak.

“We are not desperately in a hurry to push through things as we want to wait and make sure we get a good deal before we dispose of any more assets,” he added.

Earlier this year, Sime Darby group disposed of its 30% stake in Tesco Malaysia to Thailand’s Charoen Pokphand Group.

“Some of the conditional approval was received from Thailand’s Trade Competition Commission and also our Ministry of Domestic Trade and Consumer Affairs.

“We are going through the conditions, and that should hopefully be completed within the next month,” he said.

In April, Sime Darby’s wholly owned subsidiaries, Sime Darby Allied Products Bhd and Sime Darby Holdings Bhd, entered into conditional agreements with CP Retail Development Co Ltd, Tesco Holdings BV and Tesco plc for the disposal.

The group is expected to record an estimated net gain on disposal of RM270 million from the proposed deal.

Jeffri expressed his optimism the motors division would still continue to receive a strong demand and be the main contributor to the group earnings for FY21.

“We see growth in China is good with the continual urbanisation, growing of the middle-class group and affluent community,” he said.

Moving forward, Jeffri said Sime Darby’s strategies remain the same in the last few years.

“Firstly, we broadly focus on improving our returns for invested capital. This includes managing balance sheets, cost and investments. We want to do something in China, as there are the growth opportunity and divestment of our non-core assets,” he added.

Asked on the possible listing of Ramsay Sime Darby Health Care, Jeffri said the decision will be made between six and nine months as the conglomerate would need to carefully evaluate the corporate exercise.

He said Sime Darby’s healthcare segment was impacted by the Covid-19 as people were hesitant to visit hospitals, which reduced inpatient and outpatient counts for the group.