MARKET DEVELOPMENT
Sime to Ride on CPO Prices
Sime to Ride on CPO Prices
11/04/2016 (New Straits Times) - Sime Darby Bhd is expected to perform better in the current financial year ending June 2017 if crude palm oil prices (CPO) continue to trend upwards.
With a market capitalisation of RM53.88 billion, Sime Darby is Malaysia’s largest conglomerate with core businesses in plantation, property, heavy machinery, motors, seaport operations and healthcare.
The plantation division is the biggest earnings contributor to group revenue, contributing about 40 per cent.
Sime Darby is the world’s largest listed oil palm planter with more than a million hectares of landbank.
“We have a conservative forecast that palm oil prices for the next six months are likely to trade sideways, between RM2,500 and RM2,600 per tonne,” said Sime Darby president and group chief executive Tan Sri Mohd Bakke Salleh.
“We would be happy if prices continue to trade upwards to RM3,000 per tonne from the current RM2,700,” he said after the company’s shareholders meeting, here, yesterday.
Bakke had previously said that every RM100 per tonne change in the palm oil price would translate to an “addition or reduction of RM250 million” to the group’s profit.
Last night, the third month benchmark palm oil futures on the Bursa Malaysia Derivatives Market added RM5 to trade at RM2,737 per tonne.
CIMB Investment Bank analyst Ivy Ng, in her latest notes to investors, expects palm oil prices to trade between RM2,400 and RM2,800 per tonne for the rest of the year.
“We maintain our ‘neutral’ stance and forecast palm oil prices to average RM2,450 per tonne this year and RM2,600 per tonne next year,” she said.
Asked on Sime Darby’s business direction for the current year ending June 2017, Bakke said the group will continue to work towards improving oil yields at its estates and manage gearing ratio.
Last month, Fitch Ratings revised its outlook on Sime Darby to “stable” from “negative”.
The international ratings agency affirmed the long-term foreign- and local-currency issuer default ratings (IDR) at “BBB+”.
Sime Darby’s senior unsecured rating and the rating on its sukuk issue have been affirmed at “BBB+”.
Two weeks ago, the Malaysian Rating Corp Bhd announced it will restore Sime Darby’s progress in its gearing levels in view of asset disposals, share placement exercise and the plan for its industrial properties in Australia to be injected in Saizen Real Estate Investment Trust (REIT) through a backdoor listing in Singapore.
The Saizen REIT will acquire Sime Darby’s properties in Australia for A$356 million (RM1 billion).
Malaysian Rating Corp also noted that the recovery in palm oil prices to around RM2,600 per tonne levels in recent months bodes well for Sime Darby.
The conglomerate’s RM4.5 billion ICP/IMTN and Perpetual Sukuk are rated MARC-1ID/AAAID and AAIS, respectively, with a negative outlook.
Bakke said he is optimistic many more credit agencies would give better rating as Sime Darby’s gearing levels continue to improve.
With a market capitalisation of RM53.88 billion, Sime Darby is Malaysia’s largest conglomerate with core businesses in plantation, property, heavy machinery, motors, seaport operations and healthcare.
The plantation division is the biggest earnings contributor to group revenue, contributing about 40 per cent.
Sime Darby is the world’s largest listed oil palm planter with more than a million hectares of landbank.
“We have a conservative forecast that palm oil prices for the next six months are likely to trade sideways, between RM2,500 and RM2,600 per tonne,” said Sime Darby president and group chief executive Tan Sri Mohd Bakke Salleh.
“We would be happy if prices continue to trade upwards to RM3,000 per tonne from the current RM2,700,” he said after the company’s shareholders meeting, here, yesterday.
Bakke had previously said that every RM100 per tonne change in the palm oil price would translate to an “addition or reduction of RM250 million” to the group’s profit.
Last night, the third month benchmark palm oil futures on the Bursa Malaysia Derivatives Market added RM5 to trade at RM2,737 per tonne.
CIMB Investment Bank analyst Ivy Ng, in her latest notes to investors, expects palm oil prices to trade between RM2,400 and RM2,800 per tonne for the rest of the year.
“We maintain our ‘neutral’ stance and forecast palm oil prices to average RM2,450 per tonne this year and RM2,600 per tonne next year,” she said.
Asked on Sime Darby’s business direction for the current year ending June 2017, Bakke said the group will continue to work towards improving oil yields at its estates and manage gearing ratio.
Last month, Fitch Ratings revised its outlook on Sime Darby to “stable” from “negative”.
The international ratings agency affirmed the long-term foreign- and local-currency issuer default ratings (IDR) at “BBB+”.
Sime Darby’s senior unsecured rating and the rating on its sukuk issue have been affirmed at “BBB+”.
Two weeks ago, the Malaysian Rating Corp Bhd announced it will restore Sime Darby’s progress in its gearing levels in view of asset disposals, share placement exercise and the plan for its industrial properties in Australia to be injected in Saizen Real Estate Investment Trust (REIT) through a backdoor listing in Singapore.
The Saizen REIT will acquire Sime Darby’s properties in Australia for A$356 million (RM1 billion).
Malaysian Rating Corp also noted that the recovery in palm oil prices to around RM2,600 per tonne levels in recent months bodes well for Sime Darby.
The conglomerate’s RM4.5 billion ICP/IMTN and Perpetual Sukuk are rated MARC-1ID/AAAID and AAIS, respectively, with a negative outlook.
Bakke said he is optimistic many more credit agencies would give better rating as Sime Darby’s gearing levels continue to improve.