Sime Darby Bhd.'s Shares Surge After Offer to Acquire UMW Holdings
Shares of Sime Darby Bhd. and UMW Holdings experienced an early surge on Friday following Sime Darby's proposal to acquire a majority stake in UWM.
Sime Darby's shares rose by 4.7% to MYR2.21, while industrial group UMW's shares gained 3.9% to MYR4.80.
On Thursday, Sime Darby offered to purchase a 61.2% stake in UMW Holdings from Permodalan Nasional Bhd., a government-linked asset manager, for MYR3.57 billion or MYR5.00 per share.
Trading in both stocks was temporarily suspended on Thursday afternoon pending the announcement.
Sime Darby has also put forward a proposition to launch a mandatory takeover offer to acquire the remaining 38.8% shareholding and take UMW private.
Jeffri Salim Davidson, the CEO of Sime Darby, stated that the deal represents a strategic move to expand and strengthen the company's presence in the Malaysian automotive sector.
"The deal will solidify Sime Darby's position as Malaysia's leading automotive player," added Davidson in a statement.
UMW is the largest shareholder in Perusahaan Otomobil Kedua (Perodua), a prominent national automotive manufacturer, and also serves as a distributor for Toyota vehicles within Malaysia.
In separate news on Thursday, Sime Darby announced that its fiscal fourth-quarter net profit increased to MYR622 million from MYR278 million the previous year. This growth was primarily driven by disposal gains from its motor segment's properties and dividend income.
Quarterly revenue also saw a notable increase of 22% year-on-year, reaching MYR13.29 billion.
Kenanga Investment Bank has indicated that the acquisition has the potential to boost Sime Darby's earnings by 14% by FY 2025, and it could significantly expand Sime Darby's market share in the local automotive sector from 3% to over 50%. As a result, the bank raised Sime Darby's target price to MYR2.45 from MYR2.40 while maintaining an outperform rating.
Citi has similarly expressed a positive outlook on the share price, expecting strategic advantages and potential earnings per share accretion from the merger. Citi forecasts a 12% increase in Sime Darby's FY 2024 EPS following the complete acquisition of the 100% stake. For Sime Darby, Citi maintains a buy rating and a MYR2.50 target price.
