SD Guthrie’s push into industrial land bodes well

PETALING JAYA: Prospects for SD Guthrie Bhd are set to strengthen as the plantation group deepens its push into industrial land development, a move expected to enhance earnings visibility and unlock latent asset value over the coming years.

In a recent research note, Maybank Investment Bank Research (Maybank IB) said SD Guthrie has accelerated momentum by securing more than 10 memorandums of understanding (MoUs), with two sale and purchase agreements (SPAs) already signed, covering over 15,000 acres earmarked for the development of industrial parks.

“This helps provide earnings visibility to achieve its RM500mil-RM700mil a year recurring income from the new ventures,” the research house said.

Maybank IB noted that land price benchmarks have moved decisively higher since its last assessment, prompting a reassessment of asset values.

“Recently transacted prices of agricultural land in Johor, Selangor and Negri Sembilan have beat our estimates. We now attach higher price to our land values, which were last revalued in 2017, at listing,” the research house said.

It reiterated its “buy” call on SD Guthrie, with a higher target price of RM6.31, up from RM5.75, on unchanged 0.55 times revalued net asset value (RNAV).

Recent transactions in Johor were highlighted as a key catalyst, with Maybank IB pointing out that transaction prices last year for agricultural land near SD Guthrie’s land in Kulai were at record highs of RM20 per sq ft (psf) for SD Guthrie-Eco World Development Group Bhd and RM15 psf for Kuala Lumpur Kepong Bhd-Mah Sing Group Bhd.

This was 20% to 60% higher than previous highs in 2023 to 2024 in the same area.

The research house added that prices in Selangor and Negri Sembilan were also ahead of expectations, leading the research house to “conservatively” raise its average land value estimates by 20% each for Selangor (to RM6 psf), Negri Sembilan (to RM2.40 psf) and Johor (to RM 1.80 psf), which lifted RNAV to RM11.47 per share.

Beyond the valuation increase, the geographical spread of projects was cited as strategically positive, the research house added, noting that more than 15,000 acres of land, which has been identified for potential industrial developments spanning different states, is a good diversification strategy given the geographical spread.