Sime Darby could enter Indonesia, India in quest for ‘next China’
Summary
Sime Darby earns about 88% of its revenue from outside MalaysiaKUALA LUMPUR (MALAYSIA) : Malaysian conglomerate Sime Darby Bhd. could enter India and Indonesia in its search for its next major growth market with its balance sheet strengthened after it posted record profits, the company’s chief executive said.
“India and Indonesia are large markets with favorable demographics. Hence, we are exploring to build a presence there," chief executive Jeffri Salim Davidson said in an interview with Dow Jones Newswires. “We are looking to find the ‘next China.’"
He added that the company has a relatively unleveraged balanced sheet with gearing of about 20%, giving it ample room to borrow to expand.
Sime Darby, which has businesses spanning from sales of vehicles and heavy equipment to hospitals and seaport operations, earns about 88% of its revenue from outside Malaysia, with its top markets in China and Australia. The company has yet to develop a significant business in India and Indonesia, the world’s second- and fourth-most populous nations, respectively.
Mr. Jeffri’s comments about the company’s potential expansion come after it posted record-high net profit of MYR1.43 billion ($342 million) for the fiscal year ended June 30, 2021, largely on higher automotive sales in China. Mr. Jeffri said the mark will “be difficult to top" in 2022.
Sime Darby expects industrial equipment sales to rise in the coming year, driven by increased business activity as the impact of the Covid-19 pandemic in major Asian markets eases.
“We are seeing signs of a bull run on commodities and resources with energy, metals and food soaring in 2021," Mr. Jeffri said. “This, alongside governments increasing their budgets on infrastructure spending, are expected to drive industrial equipment growth in the coming year."
He said he remains bullish on long-term growth in China, the company’s biggest market. Sime Darby’s revenue from China rose almost 30% in the latest fiscal year, fueled by pent-up demand from consumers who diverted spending to luxury vehicles amid restrictions on international travel. Sime Darby sells luxury auto brands including BMW, Rolls-Royce and McLaren in China.
It is also ramping up its offerings of electric vehicles and plans to make more than half its portfolio energy efficient by 2025. The company intends to carry all of BMW’s EV models in some markets, and is expanding EV offerings in China with industry players including BYD, NIO, Li Auto and Weltmeister.
The partnerships in China “offer us more exposure to the fast-growing Chinese-made EV market in China, and these players will have the opportunity to piggyback on us to penetrate" markets in Southeast Asia, Mr. Jefferi said.
Sime Darby plans to roll out EV products first in China, Hong Kong and Singapore, its markets “most receptive to EVs," Mr. Jeffri said.
Mr. Jeffri said the group is also exploring strategic expansion of its healthcare division via acquisitions in Southeast Asia amid growth in medical tourism and rising healthcare penetration in Asia.
