05/02/2014 (Bernama) - Kenanga Research has maintained its "outperform" call for Sime Darby as it believed that the year-to-date six per cent decline in its share price to below RM9.00 has presented investors with an opportunity to accumulate Sime Darby at attractive valuation levels.

Even though crude palm oil (CPO) prices have improved significantly year-on-year and are currently trading at above RM2,500 metric tonne against RM2,221 metric tonne in January 2013, Sime Darby was surprisingly trading lower than the January 2013 range of RM9.22 to RM9.71.

"Additionally, we expect second quarter this year earnings to improve quarter-on-quarter due to better CPO prices and higher fresh fruit bunches (FFB) production.

"Overall, we expect this financial year to see healthy earnings growth of five per cent as earnings recovery in plantation division should more than offset the weaker non-plantation division," said the research house in a statement today.

Kenanga research believed that the prospects for the plantation division should improve significantly in this financial year as it expects Sime Darby to realise average CPO prices of RM2,583 metric tonnes.

"This is mainly due to our bullish view on CPO prices in which we expect average CPO prices of RM2,800 metric tonnes in calendar year 2014 due to strong biodiesel demand from Indonesia and expected lower inventory in Malaysia by end-2014.

"We maintain "outperform" with unchanged target price of RM10.30 and maintain our financial year end-2014 and financial year end-2015 core earnings at RM3.65 billion at RM4.05 billion, respectively," added the research house.