KUALA LUMPUR: Sime Darby Bhd deserves a re-rating on its credit status following an aggressive monetisation exercise, said president and group chief executive Tan Sri Mohd Bakke Salleh.
“I do believe so because we have brought down our gearing from 57% to 44% over the past one year.
“With further monetisation and deleveraging activities, we believe that we can achieve our target of 38% soon,” he told reporters after the group’s AGM.
Bakke added that this was one of the reasons why Fitch Ratings had recently revised its credit outlook for Sime Darby to “stable” from “negative” previously.
Back in March, both Moody’s Investor Service and Fitch downgraded Sime Darby’s credit rating after its cashflows came under pressure due to a large debt load as well as deteriorating market conditions across its key segments.
Moody’s currently has a Baa1 rating on Sime Darby’s credit while Fitch has a BBB+rating. Both ratings are several notches below the top investment grades by the respective firms.
“We have completed stage one of our asset monetisation exercise in June and we have continued unlocking value for the first financial quarter of this year. The results of this will be disclosed during our first quarter earnings results by the end of this month,” he said.
The conglomerate had undertaken numerous monetisation efforts throughout its financial year ended June 30, 2016 (FY16).
During the one-year period, Sime Darby successfully raised nearly RM6bil in extra cash. Among the fundraising efforts were a RM2.36bil share placement to selected investors, a RM2.2bil perpetual sukuk and RM767mil in asset disposals across multiple business segments.
Going forward, Bakke reiterated the conglomerate’s two core objectives in the coming year – to push down its gearing further and to realise better yields from its core plantation business.
“We are looking at an average crude palm oil (CPO) price of between RM2,500 and RM2,600 over the next six months. Improving the extraction and yields from our fresh fruit bunches (FFB) will also ultimately drive the profits further,” he said.
As for its property business, he said the group would be evaluating its assets prior to making a investment or divestment decision.
“We have successfully launched three new offerings this past quarter. There will be more, but the consumer sentiment for properties today is not as exciting as it was three to four years ago.
“I think where we have assets that are not giving us the desired returns, we would then explore (monetisation) options,” he explained.
Sime Darby will announce its first quarter results for the period ended Sept 30 on Nov 25.
Sourced from The Star