MARKET DEVELOPMENT
Affin Research Downgrades Sime Darby to Add
Affin Research Downgrades Sime Darby to Add
30/05/2014 (The Star) - Affin Research has downgraded Sime Darby with a target price of RM10.52, it said in a note on Friday.
It said the target price is based on our lower CY15 earnings per share of 65.7 sen and an unchanged target price to earnings of 16 times.
In addition to its diversified operations across South East Asia, North Asia and Australasia, Sime Darby also offers good potential to unlock the values of its assets through major corporate exercises and/or listings, it said.
The research house said Sime Darby’s 3QFY14 core net profit of RM793mil was 2.8% higher on-quarter.
“Contributing to the on-quarter increase are a net foreign exchange gain of RM94.5mil and a lower effective tax rate due mainly to adjustment to deferred tax assets and recognition of deferred tax assets,” it said.
However, Sime Darby's 9MFY14 core net profit amounts to just 70% of Affin's full year forecast of RM2.95bil and 65% of consensus average.
It said crude palm oil average selling price will likely to be approximately 3% lower in 4QFY14 while market conditions still remain challenging for the other divisions, therefore full year FY14 core net profit is unlikely to meet Affin's forecast.
“The plantation division will continue to be biggest contributor, riding on rising FFB production and CPO ASP while an order book of RM2.6bil and unbilled sales of RM1.6bil will cushion profits for the Industrial and Property divisions,” it said.
It said the target price is based on our lower CY15 earnings per share of 65.7 sen and an unchanged target price to earnings of 16 times.
In addition to its diversified operations across South East Asia, North Asia and Australasia, Sime Darby also offers good potential to unlock the values of its assets through major corporate exercises and/or listings, it said.
The research house said Sime Darby’s 3QFY14 core net profit of RM793mil was 2.8% higher on-quarter.
“Contributing to the on-quarter increase are a net foreign exchange gain of RM94.5mil and a lower effective tax rate due mainly to adjustment to deferred tax assets and recognition of deferred tax assets,” it said.
However, Sime Darby's 9MFY14 core net profit amounts to just 70% of Affin's full year forecast of RM2.95bil and 65% of consensus average.
It said crude palm oil average selling price will likely to be approximately 3% lower in 4QFY14 while market conditions still remain challenging for the other divisions, therefore full year FY14 core net profit is unlikely to meet Affin's forecast.
“The plantation division will continue to be biggest contributor, riding on rising FFB production and CPO ASP while an order book of RM2.6bil and unbilled sales of RM1.6bil will cushion profits for the Industrial and Property divisions,” it said.