Sime plans to unlock RM1.4b assets


PETALING JAYA: The speculated buyout of Axis Real Estate Investment Trust (Axis REIT) and its management firm by Sime Darby Bhd, if it pans out, would be the fastest way to unlock the RM1.37bil in properties owned by Sime compared with a traditional listing, analysts say.

They said that a precedent has been set when Malaysian Resources Corp Bhd (MRCB) proposed to inject properties into Quill Capital Trust and its management company in a RM756mil transaction in April to be paid in cash and shares.

At the end of the deal, MRCB will have a stake of close to 32% in Quill and 41% stake in Quill Capital Trust’s management company.

Sime has confirmed that going into the REIT sector was one its long-term goals and would ensure it was done at a right time.

Sources said Sime had appointed an investment bank to undertake its foray into the REIT sector and a prime target was Axis REIT.

Axis REIT Managers Bhd CEO Datuk Stewart LaBrooy was not available for comment.

Axis REIT, the first property trust to be listed on Bursa Malaysia, owns mostly industrial and office properties.

Its management company is controlled by Axis Development Sdn Bhd, the private equity arm of the REIT’s founders and promoters.

Axis Development, in turn, is majority-owned by Axis Equities Sdn Bhd.

Analysts have mixed views on the potential deal between Axis REIT and Sime, but several agree that it would help unlock the value of Sime’s property assets.

Maybank IB Research said it believed that Sime may be targeting Axis REIT rather than the REIT management company, although it did not rule out the bundling of both in a potential sale.

“If it materialises, this would be the second merger and acquisition in the Malaysian REIT sector after the injection by MRCB into Quill Capital Trust, which saw MRCB becoming Quill Capital Trust’s largest shareholder with a 31% to 32%,” the brokerage said in a report yesterday.

Maybank IB Research said that based on Sime’s 2013 annual report, the group has some RM1.37bil worth of investment properties in Malaysia comprising offices, convention centre, hotel, retail mall, showrooms and an assembly plant.

“The potential entry of Sime into Axis REIT means a substantial injection ahead, (which we think is) a win-win scenario. We are not overly worried about potential staff retention risks.

“Taking a cue from Sime’s investment in Eastern & Oriental Bhd, we believe Sime will most likely retain the existing proven asset management team to help expand the business,” the research outfit added.

Kenanga Research however said that it would be surprised if Axis REIT would be Sime’s target.

“We are surprised by this news as there has been no indication from Axis REIT, or any of the other Malaysian REITs under our coverage, to sell its REIT management company.

“Axis REIT’s management has led us to believe that it is highly unlikely Sime would acquire its management arm. As such, we make no changes to our valuations at this juncture.”

Among Sime’s commercial properties are Melawati Corporate Centre, a planned 10-storey commercial building in Gombak which will comprise six shops, 104 offices and four basement levels when it is ready in 2015.

By the end of 2016, it will also have a mall under its stable via a 50:50 joint-venture project with CapitaMalls Asia.

It is joining forces with IOI Corp Bhd to develop a 2.2ha parcel along Jalan Kemajuan, here into a nine-storey podium with shop-offices at the bottom and two blocks of service apartments on top of the podium with 758 units.


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