-  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 4QFY14 core net profit of RM1,192mil (inclusive of discontinued operation profit), bringing the total for FY14 to RM3,352mil (-9% YoY). This beat expectations, accounting for 21% and 7% above our and consensus estimates, respectively.

-  However, note that the result would have met our forecast if not for a lower taxation at 17.8% vis-a-vis our rate assumption of 25%. At the EBIT and pre-tax levels, earnings were 3% above our forecasts.

-  Excluding discontinued operations, core net profit amounted to RM3,029.9mil, down 4% YoY. It proposed a final single tier dividend of 30 sen/share, bringing the total for the year to 36 sen/share (FY13: 34 sen/share) – one sen/share above our forecast and which translates to a yield of 3.8%.

-  The property division exceeded our revenue and EBIT estimates by 38% and 59%, respectively. Unbilled sales remained strong at RM2,295mil (+48% YoY) as at end- FY14, while the gross sales value rose 28% to RM2,750mil in FY14 from RM2,156bil in the previous year. This was on the back of 33 project launches, with take-up rates of ~75%.

-  Plantation EBIT was 11% above our estimate as the CPO average price exceeded our assumption of RM2,330/tonne (Actual: RM2,451/tonne).

-  These were offset by lower performances of the Energy & Utilities and Others segments. The industrial division’s revenue and EBIT accounted for 90% and 92% of our estimates, respectively.

-  At an analyst briefing on Friday, management says it does not expect any significant turnaround in the industrial division within the next two years. It confirmed the impending listing of the motors division, which performed in line with our expectations in FY14.

-  The motors division sold a total of 92,112 vehicles in FY14, up 3.4% from the previous year’s 89,126 units. It is working towards securing new dealerships and markets to further expand scale and volume.

-  Management expressed concerns about Indonesia’s proposed regulations that would limit foreign ownership of plantation assets there to 30%, but remain hopeful that it would not be carried out. We maintain our numbers and Buy call.

Source: AmeSecurities