Tan Sri Mohd Bakke Salleh - President and CEO of Sime Darby Bhd By Gurmeet Kaur

by **Cals** Sun 29 Dec 2013, 23:57

Published: Saturday December 28, 2013 MYT 12:00:00 AM
Updated: Saturday December 28, 2013 MYT 11:55:11 AM
Tan Sri Mohd Bakke Salleh - President and CEO of Sime Darby Bhd
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Mohd Bakke may have kept out of the limelight for most of last year, but things could change this year if Sime Darby Bhd embarks on what many are speculating – unlocking its hidden value.
It is said that Bakke and his team have been weighing the best option to extract value for shareholders, among which may include a merger of its Indonesian plantation arm or the listing of its property division for starters.
In August last year, Bakke had indicated that Sime Darby intended to list its core businesses at the right time. Later in November he said the group was aiming to finalise either a merger for its Indonesian operations or an initial public offering in Jakarta in 2014.
Due to regulations, Sime Darby will be looking to restructure its ownership of its Indonesian assets. And that in turn could lead to possible M&A activity, analysts say. Indonesian rules state that a listed vehicle that is majority owned by the public will be given more leeway to expand its asset base in the country and this had led to talk that Sime Darby may reduce its ownership of its Indonesian plantations to below 50%.
Then there is talk of a potential spinoff of the property division given the potential and the large amount of working capital required for the Battersea project in the UK. Some analysts estimate that a listing could happen before the completion of phase one of the Battersea project anticipated sometime in 2016 and 2017.
A property IPO would turn Sime Darby’s property arm into the largest listed developer on Bursa Malaysia in terms of land bank size and potential development value. Sime Darby currently has a land bank of 19,000 acres, which analysts say could generate a gross development value of over RM70bil. Additionally, it has 35,000 acres of land bank with property development potential in greater Klang Valley.
Under Bakke’s leadership, the conglomerate has revamped its structure with each of its six major business divisions – energy and utilities, plantation, healthcare, property, motor and industrial – having its own board of directors and committees. But due to the diversification, Sime Darby continues to suffer from a “conglomerate discount”. Its market cap of RM57.39bil as at Dec 27 is a far cry from the RM78.7bil it achieved on Jan 11, 2008 – the highest since it was listed on the local bourse on Nov 30, 2007 after its mega-merger.
That aside, the 59-year old trained accountant has his work cut out for this year given the challenging economic scenario. Sime Darby had recently lowered its key performance indicators for the financial year ending June 30, 2014 with a targeted net profit of RM2.8bil from RM3.2bil a year earlier. The return on average shareholders’ funds, meanwhile, was reduced to 10% compared with 12% previously. – By Gurmeet Kaur