- 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 3QFY14 core net profit of RM793mil (+3% QoQ, +13% YoY), bringing the total for 9MFY14 to RM2,064mil (-14% YoY). No dividend was declared.

- The 9MFY14 earnings represent 74% of its internal profit target of RM2.8bil, but below expectations, representing 65% of consensus and only 56% of our estimates. We will be reviewing our numbers, in line with the latest results.

- The better quarterly bottom line was partly due to a lower effective tax rate of ~12% arising from an adjustment to the deferred tax following the changes in the RPGT rate and the income tax rate from 25% to 24%.

- Topline growth and margins across the board remained muted.

- The CPO ASP rose 4% YoY to RM2,439/tonne for the 9MFY14 period, but was more than offset by a 12% decline in FFB production to ~7.1mil tonnes from ~8.1mil tonnes a year earlier.

- The group expects FFB production to decline by ~5% for the full year. CPO production fell 10.7% YoY to 1.74mil tonnes.

- Lower FFB production was registered in both Indonesia and Malaysia, by 20.4% and 6.7% respectively. The decline in Indonesia was due to the delay in peak cropping and prolonged dry weather. Overall OER was slightly higher at 21.9% vs. 21.8% the year earlier.

- In 9MFY14, property est. EBIT fell by over 30% despite an 8% rise in revenue, on the back of lower margin sales. Unbilled sales amounted to RM1.65bil as at end-March 2014.

- The Motors division improved sequentially in 3QFY14, but overall, still faces a tough operating environment. Nonetheless, the Malaysia operations maintained strong growth with higher contributions from Hyundai, Ford, Land Rover and the Hertz franchised car rental operations.

- In the industrial division, Sime Darby said lower equipment deliveries and product support sales in the mining sector amid unfavourable coal prices continued to weaken the Australian mining sector.

- For 9MFY14, industrial revenue was down 14% YoY, while EBIT at RM787mil was off last year’s numbers by 13%.

Source: AmeSecurities