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Nikkei Markets

Sime Darby looks at exiting China ports business

Move in line with non-core asset sales as throughput falls on Sino-US trade row

Sime Darby manages hospitals and sells insurance as well as operates Tesco hypermarkets in Malaysia.     © AP

KUALA LUMPUR (Nikkei Markets) -- Malaysia's Sime Darby is looking at exiting the ports business in China by selling off its entire stake, its group chief executive said Thursday, in a move reflecting the automotive-and-industrial company's broader plan to dispose of its non-core assets.

Sime Darby, which operates four ports in China's Shandong, is witnessing 5%-to-8% decline in throughput, following the U.S.-China trade war, Jeffri Salim Davidson said in a news conference. The disposal, however, will take a long time due to regulatory requirement, he said.

"Among the non-core assets, our priority is to sell port business in China," Davidson said.

The proposed disposal is the latest corporate action since the demerger of its plantation and property businesses in December 2017. Sime Darby also manages hospitals and sells insurance as well as operates Tesco hypermarkets in Malaysia.

In July, the company announced it was selling its China-based water management business, Weifang Sime Darby Water Management to a Chinese state-owned company for $68 million to rebalance its portfolio and focus on its core businesses.

Analysts said the proposed sale of the already-matured port assets that offer little room for growth will allow Sime Darby to sharpen focus and invest in other businesses that are more profitable.

"The divestment is a good way for the company to restructure its business portfolio," said Hong Leong Investment Bank Analyst Daniel Wong. "Even if it pumps in more money into it, the return of investment may not be up to expectation."

Sime Darby's automotive assembly and industrial equipment business, which mainly sells Caterpillar tractors, generate more than 90% of its annual revenue.

Moving forward, the company aims to grow its healthcare business across Southeast Asia, driven mostly through mergers and acquisitions, Davidson said. Sime Darby may also participate in Malaysia's proposed national car project but won't be involved in making any vehicle he said.

"Given that there are minimal details about the third national car at this juncture, SDB does not have any concrete plans in relation to this," a spokesperson said in an emailed statement. "We have the expertise and we are looking for opportunities," he said.

Last month, the government said it will support the proposed national car project - guided by the trade ministry - with licensing, and the scope of help will expand if the project aims to deliver a car that could be targeted at the entire Southeast Asian region, or ASEAN markets.

Prime Minister Mahathir Mohamad has enlisted help from foreign automakers, including Nissan Motor and Toyota Motor, to help drive the project in his attempt to boost the country's engineering and manufacturing capabilities.

Shares of Sime Darby fell 0.8% to 2.36 ringgit, while the benchmark FTSE Bursa Malaysia KLCI ended 0.3% higher.

-- Gho Chee Yuan

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