SDG: Strategic Land Deal Unlocks Value and Bolsters Future Earnings

SD Guthrie Berhad has announced a significant second land transaction with Eco World Development Group, involving the disposal of 941.821 acres of freehold land in Kulai, Johor. Located within the Johor-Singapore Special Economic Zone (JSSEZ), the transaction is valued at RM814.7 million, or RM19.85 per square foot. This land, currently planted with oil palms, is set to be jointly developed by SD Guthrie, Eco World Development Group, and Permodalan Darul Ta’zim.

In addition to the land sale, SD Guthrie will acquire a 25% stake in the Eco Business Park 8 (EPB8) industrial project, which boasts a total Gross Development Value (GDV) of RM3.75 billion. Under the partnership, Eco World Development will hold a 65% majority stake, with Permodalan Daruk Ta’zim holding the remaining 10%. The EPB8 is envisioned as a 10-year project featuring industrial lots, ready-built factories, and commercial units designed to cater to high-growth sectors such as electrical and electronics, logistics, advanced materials, and clean technology. This venture is projected to contribute approximately RM10 million annually to SD Guthrie’s earnings.

Financial Implications and Rationale

Analysts at PUBLIC INVESTMENT BANK commend the strategic move, noting that it effectively unlocks the existing value of the company’s plantation assets and is expected to generate recurring income. The proposed disposal is highly value-accretive, anticipating a substantial net gain of RM526 million for the group in the financial year 2026 (FY26F), representing a 182% gain on disposal. Furthermore, the deal is expected to strengthen SD Guthrie’s balance sheet, with gearing projected to improve marginally from 0.24x to 0.23x, and an estimated additional earnings per share contribution of 7.6 sen in FY26F. The completion of the land disposal is anticipated by the second half of 2026.

Analyst View and Outlook

This marks SD Guthrie’s second collaboration with Eco World Development within six months, following a previous disposal of 1,195.5 acres in Jimah, Negeri Sembilan, for RM572.7 million earlier this year. Despite these positive developments, PUBLIC INVESTMENT BANK has opted to maintain its “Neutral” rating on SD Guthrie, with an unchanged target price of RM5.88. The target price is based on 20 times the estimated FY26 earnings per share, reflecting an expected return of +8.9% from the last traded price of RM5.40. The sustained neutral stance suggests that while the deals are beneficial, they are largely aligned with current expectations or not yet significant enough to warrant an upgrade in the near-term outlook.