BY P. ARUNA
PETALING JAYA: In line with Sime Darby Bhd’s recent asset disposal and share placement exercise, Malaysian Rating Corp Bhd (MARC) has issued a rating update on the group.
The rating house said the conglomerate has made steady progress in utilising proceeds from the exercise to pare down its borrowings, which had risen sharply following its acquisition of New Britain Palm Oil Ltd for RM6bil in March 2015.
The acquisition had contributed to a substantial increase in the group’s consolidated borrowings to RM18.1bil at end-June 2015, pushing its leverage to 0.57 times.
Sime Darby has been under pressure to reduce its gearing following the acquisition.
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The group has also completed the sale of another Singapore property and disposed a 10% equity interest in Eastern & Oriental Bhd in the first quarter of financial year 2017, which are expected to bring in gross proceeds of about RM570mil.
MARC said Sime Darby’s share placement exercise generated proceeds of RM2.4bil, of which RM1.2bil will be utilised to reduce its borrowings.
“As a result of these measures, MARC estimates Sime Darby’s borrowings to decline to about RM15.2bil, which would reduce its consolidated debt-to-equity to about 0.40 times,” the ratings house said in a statement yesterday.
It said the disposal of industrial properties in Australia worth about RM1.1bil was on the cards, further adding to the group’s liquidity.
It added that the recovery of crude palm oil prices to about the RM2,600-per-tonne levels in recent months would improve the division’s earnings.
“Notwithstanding the improved prospects of Sime Darby’s plantation division, the rating agency remains concerned with the continued subdued performance of its other divisions, in particular, the property and industrial divisions,” it said.
Sime Darby’s RM4.5bil Islamic Commercial Paper/Islamic Medium-Term Note programme and Perpetual Sukuk are currently rated MARC-1ID/AAAID and AAIS, respectively, with a negative outlook.
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