Sime Darby Plantation shares surge to a two-year high following proposed solar project in Perak

KUALA LUMPUR (May 8): Shares in Sime Darby Plantation Bhd [KL: SIMEPLT] rose to their highest in two years following its announcement to develop the Tali Ayer estate in Perak into a green industrial park.

Sime Darby Plantation rose as much as 5.57% or 25 sen to an intra-day high of RM4.73, marking its highest value since June 1, 2022.

At 11.30am, the stock was trading at RM4.63, valuing the company at RM32.02 billion, after 2.69 million shares changed hands. The country’s benchmark index, the FBM KLCI, was 0.2% higher.

At least one analyst covering Sime Darby Plantation upgraded their rating on the world’s largest palm oil producer by acreage plans, citing that the counter may be a potential beneficiary of green industrial parks, large-scale solar (LSS) scheme as well as data centres demand in Malaysia given its vast landbank.

On Tuesday, the company announced to Bursa Malaysia its plans for venturing into the green industrial park sector, starting with the proposed development of the Kerian Integrated Green Industrial Park (KIGIP) in Perak.

The group and its largest shareholder Permodalan Nasional Bhd (PNB) intend to collaborate in this 1,000-acre development, strategically located in its Tali Ayer Estate in Perak.

Maybank Investment Bank, which upgraded the stock to “buy”, with a higher target price (TP) of RM4.96, noted that “Sime Darby Plantation is no stranger to large scale solar (LSS) schemes”, having previously leased its land to third-party solar farms under the government’s LSS schemes 1 and 4.

The research house anticipates Sime Darby Plantation to benefit further from the recently announced LSS 5 (2,000MW capacity), while noting that the company is also exploring opportunities with partners to develop data centres, which typically consume a large amount of energy, potentially in Kulai (Johor) and Kulim (Kedah).

Among the analysts covering Sime Darby Plantation, five have a “buy” call on the stock, with ten maintain a “hold” call, and the remaining two have rated it as “sell”. The consensus 12-month target price is RM4.52, Bloomberg data showed.

Kenanga Investment Bank in its latest research however, noted that the impact of the green industrial park development may have minimal impact on FY2024 to FY2025 forecast earnings as it is still in an early stage while the details of the project are still scant.

“Based on the current land rental of RM5,000 to RM7,000 per acre for solar installation, a 660-acre site could earn RM3 million to RM5 million a year, which is negligible to the group,” Kenanga said.

“However, Sime Darby Plantation and/or PNB may develop the estimated — depending on terrain and infrastructure allowances — 200-300MW solar farm to sell electricity for better contribution instead,” it added.

Sime Darby Plantation to co-develop Kerian Integrated Green Industrial Park with PNB