Malaysia's Sime Darby Spinoffs Have Weak Debuts -- Update

By Yantoultra Ngui Features Dow Jones Newswires

KUALA LUMPUR, Malaysia--Two former units of Sime Darby Bhd. (4197.KU) had weak market debuts Thursday, reflecting the soft investor sentiment in the Malaysian equity market.

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Sime Darby Plantation Bhd. (5285.KU), the world's largest palm-oil producer by land size, opened at MYR5.60, just a notch higher than its reference price of MYR5.59, before closing 10% lower at MYR5.01. The stock was the second top loser on the Malaysian exchange Thursday, with trading volume of 192.51 million ringgit ($47.1 million).

Sime Darby Property Bhd. (5288.KU), Malaysia's largest real-estate developer by land bank, fared even worse. It opened at MYR1.30, 13% lower than its reference price of MYR1.50. The stock declined further and closed 20% down at MYR1.20.

Their debuts follow the weak MYR4 billion IPO of Lotte Chemical Titan Holding Bhd. (5284.KU), a petrochemical unit of South Korean conglomerate Lotte Group, in July. The much-anticipated and biggest IPO of the year in Malaysia ended its first trading day 1.9% lower than its IPO price. It has declined almost 25% since listing.

The Malaysian stock index is among the worst performers in Asia this year, only rising 4.8% year-to-date.

According to AllianceDBS Research, shares of Sime Darby Plantation are expected to be driven by crude-palm-oil price movements now that the company is a pure-play. The broker has a hold rating with a price target of MYR5.40 on the stock.

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Palm-oil prices have declined to a four-month low recently, hurt by a stronger ringgit and an increase in import taxes by India, one of the largest consumers of palm oil.

As for Sime Darby Property, the outlook for Malaysia's property market remains challenging. Affin Hwang Capital Research said the stock is considered expensive based on core price-to-earnings ratio but should be justified by the company being the largest property developer by land bank size in Malaysia. It has a hold rating on the stock with a price target of MYR1.61.

Sime Darby, now an automotive and heavy-equipment trading firm, resumed trading on a positive note. The stock opened the day at MYR2.40, 30% higher than its adjusted reference price of MYR1.85, before closing 27% higher at MYR2.35.

Write to Yantoultra Ngui at yantoultra.ngui@wsj.com

(END) Dow Jones Newswires

November 30, 2017 06:31 ET (11:31 GMT)