RHB Investment Bank Bhd has maintained a “Buy” recommendation for Sime Darby Property that has an upside of 17% to RM0.75.
The Investment Bank says that it was positive on Sime Darby Property’s partnership with LOGOS SE Asia to set up a real estate fund for an industrial development, which will be at a 177-acre site in Bandar Bukit Raja, Klang.
“With LOGOS’ strong background, Sime Property will be able to tap on the former’s network and experience to accelerate cementing its own foothold in industrial development. Nevertheless, any immediate earnings contributions should be minimal, apart from the gain on the land sale,” the stockbroking firm says.
Sime Property has entered into a shareholders’ agreement with LOGOS SE Asia to set up a JV (51% for Sime Prop, 49% for LOGOS) to provide fund management and development services to industrial development funds to be established by the JV.
The first seed fund is targeted to have a total capital commitment of about RM850 million (USD200m) from institutional investors. At the same time, Sime Prop has allocated a 177-acre site in Bandar Bukit Raja in Klang for industrial development.
RHB says that apart from the gain from the disposal of land, which will be recognised progressively over three years in three phases, management indicates that Sime Prop could also earn a stream of recurring income via the JV.
These include various fees from development, fund management, project management, property management and leasing management services. Listing the underlying assets as a REIT could be the exit avenue for the fund in future.
RHB says that it understands that, apart from the RM850 million fund size, there will also be about a 60% debt leverage in the fund for the entire industrial development. IRR and yield for the fund are targeted at 15% and 6%
