PETALING JAYA: SD Guthrie Bhd’s plans to maximise returns from its asset base, namely well located landbank, should see a higher return on equity (ROE) moving forward, says Kenanga Research.
On Wednesday, the plantation group entered into an memorandum of understanding (MoU) with Eco World Development Group Bhd
(EcoWorld) and NS Corp Sdn Bhd to jointly develop a 1,166-acre industrial park in Bukit Pelandok, Negri Sembilan.
Kenanga Research said in a report that it expects this latest collaboration to be much larger than SD Guthrie’s recent MoU with Lembaga Tabung Haji’s property unit, TH Properties Sdn Bhd, to co-develop a 464-acre halal food hub in Bandar Enstek development in Negri Sembilan.
The venture with EcoWorld and NS Corp, is said to have a gross development value of RM2.9bil, spanning over eight years.
Year-to-date, SD Guthrie announced it is investigating the viability of developing a 1,000-acre Kerian Integrated Green Technology Park in Perak with Permodalan Nasional Bhd.
It also signed a co-development MoU with TH Properties for a halal manufacturing hub at techpark@enstek and announced a joint-venture (JV) with AME Elite Consortium Bhd to develop 641 acres of green industrial park in Kulai, Johor.
SD Guthrie had also indicated that effective the fourth quarter of financial year 2024 (4Q24), property development will become one of the group’s new “operating verticals”.
“This suggests it may start attracting normal 24% corporation tax, when it sells land into its JVs rather than incurring a 10% capital gains tax.
“Also, being new to property development, SD Guthrie is pursuing all its development projects with partners, which means it has to share economic benefits, but also shield itself from excessive risks,” Kenanga Research pointed out.
The research house, which maintained the group’s FY24 to FY25 core net profits, has a “market perform” call on the stock at a target price (TP) of RM4.60 a share.
Meanwhile, MIDF Research, in a note to clients, said SD Guthrie’s new collaboration with EcoWorld is a timely venture and expected to yield value accretion to the earnings outlook in the mid-to-long term.
“This is an important strategic step for SD Guthrie as it ventures to create more revenue streams,” it noted.
Furthermore, with SD Guthrie’s recent rebranding strategy, MIDF Research said the latest venture is also a strategic move to assert full control over its plans for the vast landbank and explore unique opportunities in property development.
“According to our study, the 1,166-acre site accounts for only 1.3% of Negri Sembilan’s total planted area for SD Guthrie,” MIDF Research said.
With the land valued at RM2.95bil in gross development value, the research house said the new hub is set to benefit from the MVV 2.0 economic corridor, which spans a range of high-growth sectors, including logistics, biotechnology, electrical and electronics, and aerospace industries.
MIDF Research also highlighted that SD Guthrie’s lower gearing reflects its stronger financial footing, positioning it well to pursue new vertical income streams moving forward.
In the group’s recent briefing, SD Guthrie’s management projected recurring earnings segment would include new revenue pillars, such as the industrial segment, through industrial land sales to JVs and third parties, as well as a share of JV earnings.“While there was no guidance on that, we anticipate this industrial hub will offer compelling profits, backed by a double-digit margin. Hence, the venture into this segment will yield value accretion to SD Guthrie’s earnings outlook in the mid to long term,” MIDF Research added.
Pending details on SD Guthrie’s projects, it maintained a “buy” call on the stock and kept the TP unchanged at RM5.43 a share.
