Sime Darby Bhd’s plantation and property units made a weak debut on the Malaysian stock exchange on Thursday, with both units easing from their listing reference prices in afternoon trade.
Sime Darby Plantations Berhad, which began trade at 5.60 ringgit a share was last down over 11 percent at 4.96 ringgit in the afternoon from a listing reference price of 5.59 ringgit.
Sime Darby Property Berhad fell to 1.19 ringgit in the afternoon, down over 20 percent from its reference price of 1.50 ringgit.
“Looking at the price to earnings ratio, Sime Darby Plantations was pricey which is why we saw some price adjustments. Compared to its other plantation peers, it is not the cheapest,” said Danny Wong, chief executive of Kuala Lumpur-based Areca Capital that manages about 700 million ringgit ($171 million) in funds.
“Since it is concentrated on plantations, it will be very sensitive to crude palm oil prices, which are not high at this moment.”
Benchmark crude palm oil prices are trading at four-month lows after India, the world’s largest vegetable oil importer, raised import taxes to the highest in more than a decade.
Wong said a weak property market outlook contributed to the decline in Sime Darby Property’s shares.
“It needs to launch more projects to sustain growth, but looking at the soft market, growth will be flat to negative,” he said.
Sime Darby announced its spin-off plan in January, aiming to create three stand-alone businesses that could each focus on their core activities. Sime Darby’s trading and logistics business remained in the parent company.
Sime Darby Plantations is the largest palm oil company in the world by land size. Based on its listing reference price, it has a market capitalisation of 38 billion ringgit, making it the largest listed plantation company in Malaysia.
The plantations and property businesses accounted for nearly 70 percent of the group’s profit during the 2016 business year.
Malaysia’s bourse, up 4.8 percent this year, is one of the worst performing in the region and recent listings have had little success.
Shares of Lotte Chemical Titan Holding Bhd fell on debut in July, which was widely seen as an indication of weak investor demand.