It is reported that Sime Darby Bhd has asked its president and group chief executive Datuk Ahmad Zubir Murshid to take a leave of absence prior to the expiry of his contract on Nov 26, 2010. The group also said it would take a hit of RM964mil in its second half earnings from losses from its energy division. For more, go here.

The RM964mil provisioning that will take place, is made up of losses of RM200mil from the Qatar Petroleum project, RM159mil from the Maersk Oil Qatar project, RM155mil from a project to construct vessels for use in the latter project and RM450mil from cost overruns in the Bakun project.

Looking at the daily chart below, we can see that a medium-term downtrend has formed over the past 6 months. This morning, the share price broke below 2 horizontal support levels at RM8.50 & RM8.30. After making a low of RM8.08, the stock rebounded to a high of RM8.41 at 9.52am. With the 50-day SMA line crossing below the 100-day & 200-day MA line, Sime is likely to drift lower. I would rate Sime a SELL INTO STRENGTH at the present price of RM8.35.


Chart: Sime's daily chart as at May 13, 2010 (Source: Tradesignum)

The current losses in Sime's energy division brings to mind the RM120mil losses in futures trading in its subsidiary, Golden Jomalina in FY2008 (here). The question that must be addressed is whether Sime Darby is too big to be well-managed.