SD Guthrie Berhad is set to unlock further value from its land bank in Johor following the confirmation that the disposal of 942 acres of land in Kulai to Eco World Development Group Berhad’s joint venture entity has become unconditional.
In a report, Kenanga Investors Berhad said the transaction involved the disposal of the land to Eco Business Park 8 Sdn Bhd (EBP8) for RM815 million.
The disposal was previously announced by SDG in November and December 2025.
EBP8 is a joint venture between SDG, Eco World Development Group and Permodalan Darul Ta’zim Sdn Bhd, the Johor state government’s investment arm, with equity ownership of 45%, 45% and 10% respectively.
The joint venture plans to develop the land into an industrial park known as Eco Business Park VIII, with development expected to span about 10 years and generate an estimated gross development value (GDV) of RM3.75 billion.
The project is strategically located within the Johor-Singapore Special Economic Zone and is expected to benefit from connectivity to Senai International Airport, major highways and nearby ports.
Disposal gain timing remains uncertain
Kenanga said SDG had guided an estimated disposal gain of RM364 million from the transaction.
However, the latest announcement only confirmed that the sale and purchase agreement (SPA) became unconditional on 11 June 2026.
Completion of the transaction remains subject to EBP8 settling the remaining 85% of the consideration, as the 15% deposit had already been paid earlier.
As EBP8 has three months from 11 June 2026 to complete payment, Kenanga said it remains unclear whether the disposal gain will be recognised in SDG’s second quarter or third quarter financial results for FY2026.
Earnings forecasts maintained
Kenanga maintained its FY2026 and FY2027 earnings forecasts, noting that its estimates had already factored in land disposal gains of between RM500 million and RM600 million annually.
The research house also retained its target price for SDG at RM5.90 based on a 1.8 times FY2026 forecast price-to-book valuation.
Kenanga said SDG’s five-year average return on equity (ROE) of 12% was comparable with sector leader IOI Corporation Berhad and above Kuala Lumpur Kepong Berhad’s 10%.
However, after adjusting for one-off land disposal gains, SDG’s core ROE of 8% remained slightly below KLK’s 9% and IOI’s 12%.
The brokerage added that a 5% premium had been incorporated into its valuation in recognition of SDG’s ESG profile.
Value unlocking supports long-term outlook
Kenanga maintained its “Market Perform” recommendation on SDG, citing the company’s defensive characteristics and significant land bank value.
The research house said SDG’s strategy of selectively monetising its land assets, alongside improvements in plantation productivity and efficiency, could support better returns over the longer term.
Potential benefits include stronger balance sheet management through debt reduction and possible higher dividend payouts.
However, Kenanga noted that growth could remain moderate over the next two to three years due to the company’s large-scale operations and the maturity of the palm oil sector.
Key risks include continued Western pressure on palm oil sustainability issues, weather disruptions, labour shortages, weaker commodity prices and rising costs.
