- We maintain our BUY call for Sime Darby, with a fair value of RM11.20/share – a 10% discount to our SOP value of RM12.45/share.

- Sime Darby posted a 1QFY14 core net profit of RM499.7mil (-47% QoQ; -49% YoY) – which is below expectations and accounting for only 14% of both our and consensus forecasts.

- The group has unveiled its internal KPI target of achieving a net profit of RM2.8bil on the back of a return on average shareholders’ fund of 10%. We maintain our numbers for now.

- Declines were seen in most of the divisions. Plantation saw the CPO average price falling by 14% YoY to RM2,331/tonne (+3.6% QoQ) from RM2,707/tonne. FFB production fell 16% YoY to 2.47mil tonnes, while CPO production fell 17% YoY to 0.58mil tonnes as OER fell marginally to 21.5% from 21.6%.

- Plantation revenue fell by 15% YoY and 24% QoQ to RM2.5bil, while the division’s EBIT plunged by 62% YoY and 33% QoQ to RM255mil. Nonetheless, the FFB and CPO output was within our expectations, accounting for 24% and 23% of our full-year forecasts.

- The FFB and CPO production in Indonesia fell by 28% YoY to 0.8mil tonnes and 0.2mil tonnes, respectively, and the same in Malaysia fell by 8% and 10%. Significantly, as at 30 Sept 2013, it had planted 10,018ha in Liberia, up from 4,350ha a year earlier.

- The other divisions were also affected by challenging market conditions. The Energy and Utilities division’s revenue grew by 16% YoY, while estimated EBIT fell by 3.6%, but it more than doubled QoQ to RM55mil.

- The industrial division’s revenue fell 16% YoY and 5% QoQ to RM3.4bil on lower equipment sales to the mining sector in Australia, in the wake of the waning mining boom.

- In the motors division, revenue grew at a flat 0.7% YoY (-10.8% QoQ) to RM4.1bil, while Malaysia was the only market that showed a growth in PBIT of 3% to RM76.9mil, while SE Asia ex-Malaysia posted a loss of RM1.6mil (->100% YoY). Australia/NZ posted a PBIT of RM2.6mil (-90% YoY), while China/HK’s PBIT fell 6% YoY to RM28.7mil.

- For the property sector, operating profit rose by 2.9% YoY on the back of a 12.6% in rise in revenue; but QoQ, profit was down 78% on the back of a 61% decline in revenue. Unbilled sales stood at RM1.6bil as at end-Sept 2013.

Source: AmeSecurities