Business

Thursday August 27, 2009

Sime said to be eyeing RM4bil Islamic funding

By LEONG HUNG YEE


KUALA LUMPUR: Sime Darby Bhd, the country’s largest conglomerate, is reportedly planning a RM4bil Islamic funding programme.

In a report yesterday, Reuters quoted an unidentified company official as saying that Sime Darby would use the proceeds to “finance working capital and repay some debt”.

Sime Darby, the world’s largest listed palm oil producer, had previously tapped the market through an Islamic funding programme of over RM1bil.

“Sime Darby is going to refinance some of the old programmes, some of the existing bank loans and this will be to cater for the company’s long-term funding needs,” Reuters quoted another source as saying.

Sime Darby, which is scheduled to announce its full-year financial results today, has yet to make any announcement on the RM4bil financing plans.

A company spokesman reached by phone and email yesterday had no immediate comment. Most analysts contacted by StarBiz said they needed more details before commenting.

AmResearch deputy research head Fiona Leong believes that Sime Darby has plans for land-bank acquisition and expansion. However, she is uncertain if that is Sime Darby’s reason for raising the money.

Leong said the conglomerate’s operations in Liberia now might be small and might need money to grow. She also suggested that the company could be using the funds to pump money into Ramunia Holdings Bhd.

“Sometimes companies could have a funding programme but might not necessarily raise the full amount. Such funding programme needs the approval from the authorities and will incur cost along the way. So some companies put in a larger funding amount. It is just a facility,” she said.

Leong said although Sime Darby was in a net-debt position, its gearing was very low.

OSK Research analyst Alvin Tai said Sime Darby could be replacing its old debts with the RM4bil Islamic funding programme.

He said Sime Darby had an estimated cash and cash equivalent of RM3bil and borrowings of RM5.7bil, of which RM3.2bil was short-term borrowings.

“It could be ‘recycling’ money to repay all its short-term borrowings,” Tai said, adding that although the absolute cash Sime Darby had was sizeable, a company of its size might need more.

Based on Bloomberg’s consensus estimate, Sime Darby is expected to achieve a net profit of RM1.94bil on revenue of RM31.25bil for the financial year ended June 30.

Year-to-date, Sime Darby shares have appreciated more than 50%. The stock added one sen to RM8.23 yesterday.


SIME : [Stock Watch] [News]

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