Sime Darby Plantations is a potential beneficiary of green industrial parks, LSS5 and data centres demand in MY given its vast landbank. RE has been identified as a key strategic pillar, and a sizeable revenue source to SDPL within the next
5 years. The palm oil planter has kicked off this new initiative by participating in the proposed KIGIP project. Maybank IB said it raised SDPL to BUY (from HOLD) with a new RNAV-TP of MYR4.96 on 0.55x RNAV (from MYR4.51 on 0.5x RNAV); the higher valuation peg reflects the positive view on this new initiative.
Maiden foray into a green industrial park
As a start, SDPL and its largest shareholder (PNB) announced on 7 May their intention to collaborate in a 1,000-acre development in the proposed KIGIP project that was first announced in the national Budget 2024. KIGIP is conceptualised to attract green E&E investments. This site is located within SDPL’s Tali Ayer Estate in Perak. The plan also involves establishing
660 acres of solar farms as its principal source of green energy. The solar farms for KIGIP will be owned and operated by SDPL.
Potential beneficiary of LSS5 and data centre boom
SDPL is no stranger to Large Scale Solar (LSS) schemes as it had started leasing its land to third party solar farms under the Government’s LSS schemes 1 and 4. For LSS4, about 40% of the quota for solar farms awarded was on SDPL’s land. Additionally, under the CGPP, 38% of the quota was produced on the SDPL’s land, some for its own use. The house said it believes SDPL is prime to further benefit from the recently announced LSS5 (2,000MW capacity). SDPL is also said to be exploring opportunities with partners to develop data centres, which typically consume large amount of energy. Maybank IB has also identified two possible sites: Kulai (Johor) and Kulim (Kedah).
How does it benefit SDPL?
While no other details were shared on the above initiatives, the house reckons SDPL could benefit in a few ways (ranked by impact): (1) disposing land to the government / industrial park / RE operators, and recognize huge disposal gains (given its low historical BV), (2) be a big RE producer and generate steady income, or (3) lease its land to other RE producers for rental income (lowest impact). We make no changes to our EPS forecasts.
