Sime Darby Guthrie Bhd - Land sale of RM 933.57m to BKID
Fri, 30-Oct-2026 07:13 am
by Ong Yong Jen • Apex Research

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SDG (5285)

Target Price (RM)

7.71

Recommendation

Buy

  • SDG has entered into a strategic joint venture with Bumi Assets Sdn Bhd and YTL Power International Berhad (YTL Power) to develop approximately 1,623 acres of freehold land in Bukit Kerayong, Selangor, into an integrated industrial development.

  • We view the development positively as it strengthens SDG’s balance sheet through debt reduction, provides a one-off earnings uplift, and supports diversification via Industrial Development through its retained 30% JV stake. 

  • Maintain our BUY call with a higher target price of RM7.71 (previously RM7.60) pegged to a 19.8x P/E multiple to FY27F EPS and 0% ESG factored premium/discount based on three-star ESG rating.

 

Land sale consideration of RM 933.57m to BKID. On 29 October 2026, SD Guthrie Berhad (SDG), through its wholly owned subsidiary SD Guthrie Land Ventures Sdn Bhd (SDGLV), entered into a shareholders’ agreement with Bukit Kerayong Industrial Venture Sdn Bhd (BKIV), a wholly owned subsidiary of YTL Power International Berhad (YTLPI), Bumi Assets Sdn Bhd (BASB), and Bukit Kerayong Industrial Developments Sdn Bhd (BKID). The agreement establishes BKID as the joint venture vehicle responsible for acquiring approximately 657.09 hectares of land from SDG and undertaking the subsequent industrial development. SDGLV, BASB, and BKIV hold 30%, 35%, and 35% interest in BKID respectively. 

 

BKID's issued share capital will increase from RM100 to RM10.0 million, with SDGLV contributing RM3.0 million for its 30% equity interest. SDG has committed an investment of up to RM101.12 million, comprising the RM3.0 million equity subscription and up to RM98.12 million in short-term advances to BKID for land acquisition and related costs.

 

SDG intends to utilise the RM933.57 million gross disposal proceeds primarily for the partial repayment of existing bank borrowings, settlement of real property gains tax (RPGT), and reinvestment into BKID (See Figure 1).

 

Three parcels of Subject Land. The subject lands comprise three contiguous freehold parcels within Bukit Kerayong Estate, Kapar, Selangor, covering approximately 657.09 hectares (1,623 acres). The land is currently utilised for oil palm cultivation, with 594.02 hectares planted with mature oil palms aged between seven and 17 years. Although currently used for agricultural purposes, the land is zoned for residential use and possesses industrial development potential, subject to the necessary approvals. The land is located within an established industrial locality, with nearby developments including Golden Valley Industrial Park, H&A Industrial Park and K International Industrial Park @ Kapar 2.

 

The agreed disposal consideration of RM933.57 million represents a premium of approximately 5.0% over the independent market valuation of RM889.0 million assessed by CBRE WTW Valuation & Advisory Sdn Bhd as at 16 April 2026.

 

Takeaways. We view the transaction positively as it is in line with SDG’s strategy of diversifying beyond Plantation earnings via the Industrial Development segment while also strengthening its balance sheet. On a pro forma basis, our FY27F base EPS would rise from 45.59 sen to 47.79 sen (+4.8%) although this includes the one-off disposal gain and should not be treated as recurring earnings run rate. With RM744.4m to paydown credit facilities, we estimate FY27F net finance costs to reduce 8.65% to RM169m. Forecasted FY27F gearing ratio stands at 15.6% vs 18.8% previously. 

 

Beyond the immediate financial benefits, SDG will retain exposure to the development through a 30% stake in BKID. The JV plans to transform the land into an integrated light-to-medium industrial development with supporting commercial hubs. This offers SDG potential participation in future development profits without having to undertake the entire project independently. Nevertheless, the announcement does not provide a development timeline, project gross development value (GDV), expected development margins or projected earnings contribution. We therefore do not ascribe additional value to the JV at this stage.

 

Earnings forecast. We retain our core earnings forecast for FY26F while adjusting upwards our core earnings forecast for FY27F/FY28F by 1.53% and 1.41% respectively. 

 

Valuation. We retain our buy call with a higher target price of RM7.71 (previously RM7.60) based on a P/E of 19.8x on FY27F EPS and 0% ESG factored premium/discount based on a three-star ESG rating.

 

Risk. EU export ban and regulations, changing weather patterns affecting FFB production, taxation and export ban in Indonesia threatening local CPO demand, frequent labour turnover and rising operational cost.

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