- We maintain BUY on Sime Darby with an unchanged fair value of RM10.58/share – based on a 15% discount to our SOP value of RM12.45/share.

 - Sime Darby has obtained the European Commission’s clearance for its proposed acquisition of New Britain Palm Oil Ltd (NBPOL).

 - The Commission has concluded that the proposed acquisition “would not raise competition concerns given particularly the parties’ geographic complementarity within the EU and the presence of other suppliers of palm oil product.”

 - No conditions or obligations were attached to the EU Commission's clearance decision. This was the last major hurdle for Sime Darby to assume control of NBPOL.

 - Sime Darby had earlier for the second time extended the offer period for NBPOL, to 20 March 2015 from 20 Jan 2015.

 - Sime Darby is offering GBP7.15 cash per share under a GO for NBPL for a total of over RM5.6bil. This values it at a pricey 22x PE FY15F earnings based on Bloomberg estimates and at an EV/ha of RM84,000.

 - This now paves the way for Sime Darby to proceed with the acquisition.

 - While Sime Darby faces headwinds in the industrial division stemming from falling commodity prices, we see Sime Darby as a prime beneficiary of any upward trend in CPO prices.

 - Another catalyst is the proposed listing of its auto division, which could occur early in the second half of CY15. Maintain BUY.

Source: AmeSecurities