SD Guthrie Bhd’s strategic partnership with Sime Darby Property Bhd to develop a major industrial and logistics hub in Selangor is expected to unlock significant long-term value from its landbank, although near-term earnings growth is likely to remain modest, according to Kenanga Research.
The research house said the proposed development centres on SD Guthrie’s Bukit Kerayong estate in Kapar, Selangor, where 1,022 acres will be contributed to a joint venture that ultimately aims to transform around 3,000 acres into a next-generation industrial and logistics hub.
The development will be undertaken by Kerayong Development Consortium Sdn Bhd, a special purpose vehicle equally owned by SD Guthrie and Sime Darby Property.
Kenanga estimates the overall project could generate a gross development value (GDV) of approximately RM10 billion over a seven- to 10-year period, contributing annual profit after tax (PAT) of between RM50 million and RM100 million to each partner once development gains traction.
The Bukit Kerayong estate spans approximately 3,389 hectares and currently produces about 70,000 metric tonnes of fresh fruit bunches (FFB) annually.
Kenanga highlighted the estate’s strategic location, noting that it enjoys strong connectivity via the West Coast Expressway, Kuala Selangor-Kepong Federal Road and the coastal highway.
Future accessibility will be further enhanced by two East Coast Rail Link (ECRL) stations planned at Puncak Alam and Kapar.
The estate is located about 20 minutes from Puncak Alam, 30 minutes from Kapar and roughly one hour from North Port, making it well suited for industrial and logistics activities.
The proposed development also complements plans by both companies to jointly develop another industrial and logistics hub on approximately 2,000 acres in Carey Island, where the Selangor state government is reclaiming land for a proposed third container port capable of handling 30 million twenty-foot equivalent units (TEUs).
According to Kenanga, the two projects would position the joint venture to offer logistics and industrial solutions both north and south of Port Klang.
Following the transaction, Kenanga has raised its estimates for SD Guthrie’s disposal gains to RM1.0 billion for FY2026 from RM600 million previously, and to RM800 million for FY2027 from RM500 million.
The revisions reflect the agreed land disposal price of RM17 per square foot and the earlier-than-expected completion of the transaction.
The stronger disposal gains have also prompted the research house to raise its projected annual dividend for FY2026 and FY2027 to 22 sen per share from 18 sen previously.
Kenanga also increased its target price on SD Guthrie to RM6.00 from RM5.90, based on 1.8 times FY2027 price-to-book value (PBV), reflecting the group’s improving asset monetisation prospects and its four-star environmental, social and governance (ESG) rating.
However, despite the positive land value unlocking initiatives, the research house maintained its “Market Perform” recommendation.
It said SD Guthrie remains a defensive plantation stock with a deeply undervalued landbank and ongoing efforts to improve upstream productivity and operational efficiency, while debt reduction and higher dividend payouts could further support shareholder returns.
Nevertheless, Kenanga believes meaningful earnings growth over the next two to three years will likely remain constrained by the company’s large plantation footprint of approximately 703,000 hectares and the mature nature of the palm oil industry.
The research house also identified key risks including continued Western scrutiny of palm oil sustainability practices, adverse weather conditions, labour shortages, weaker crude palm oil prices and rising operating costs
