January 26, 2017 / 12:57 PM / 3 years ago

UPDATE 1-Malaysia's Sime Darby to spin off plantation, property businesses

(Updates with background, analyst)

KUALA LUMPUR, Jan 26 (Reuters) - Sime Darby Bhd, the world’s largest palm oil company by land size, will spin off its plantations and property businesses in separate listings on the local stock exchange, the Malaysian conglomerate said on Thursday.

The listing of the plantation business, which accounted for a major share of Sime Darby’s 44 billion ringgit ($9.9 billion) revenue last year, could be the largest plantations listing since Felda Global Ventures in 2012.

The conglomerate said it would keep its trading and logistics business in the parent company, that would retain its listed status.

“The transaction is not expected to result in any major disruption to the Sime Darby Group’s existing operations,” it said in a statement, adding the move would maximise value for shareholders.

“The proposed pure-play strategy will enable each business to focus on their respective core activities and pursue their different and distinct aspirations.”

The conglomerate announced in November it could list its plantation business as it looks to monetise assets.

It had earlier looked at listing its motors division, but put its plans on the backburner due to weak business sentiment in the automotive sector.

Sime Darby’s plantations and property arms accounted for nearly 70 percent of its profits during its 2016 fiscal year. Sime Darby reported net earnings of 2.4 billion ringgit that year.

The spin offs will be called Sime Darby Plantation Bhd and Sime Darby Property Berhad, while businesses that remain under Sime Darby Berhad include its industrial, motors, logistics and healthcare divisions.

An analyst report by UOB Kay Hian estimated the plantation division valuation at 50.9 billion ringgit, and the property division’s at 11.6 billion ringgit.

Sime Darby and its plantation division produces approximately 2.4 million tonnes or 4 percent of the world’s annual crude palm oil (CPO) output, according to its website.

Benchmark palm oil is currently trading at over four year highs as output is still seeing the lingering effects from a crop damaging El Nino weather event. It closed the trading day 1.2 percent lower on Thursday evening at 3,087 ringgit a tonne.

Sime Darby was listed in 2007, creating the world’s largest listed palm oil producer and Malaysia’s largest property developer by land bank.

Sime Darby shares closed 1.4 percent higher, outpacing the local stock index which was up 0.5 percent.

For the full statement: bit.ly/2jinZbu

$1 = 4.4270 ringgit Reporting by Emily Chow; Editing by Susan Thomas and Mark Potter

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