Stock Name: SIME
Company Name: SIME DARBY BHD
Research House: JP MORGAN CHASE



Sime Darby Bhd rose to a two-month high as brokerages including JPMorgan Chase & Co raised the stock on speculation the worst may be over for the world's biggest listed palm-oil producer after posting its latest loss.

The shares gained 1.4 per cent to RM7.99 at 11:34 am local time in Kuala Lumpur trading, the highest since June 30. The advance pared the decline this year to 11 per cent, the most on the Malaysian stock index. Chief executive officer Mohd Bakke Salleh said yesterday the company has "identified" problems it faced in the oil and gas business and expects a turnaround.

Simone Yeoh, an analyst at JPMorgan, upgraded Sime to "overweight" from "neutral," lifting her share forecast to RM9.40 from RM8.40. Hoe Lee Leng, an analyst at RHB Research Institute Sdn Bhd, raised the recommendation on the stock to "market perform" from "underperform," while AmResearch Sdn Bhd rated the stock a new "buy" with a RM9.20 target.

"Consistency in performance under leadership of the new CEO is key for a sustainable re-rating," Yeoh said in a report. "We see prospects for shorter term opportunity in Sime shares with the overhang from further provisions now behind us, stable to strong core profits from most divisions, and our recent more positive outlook on crude palm oil prices."

The Kuala Lumpur-based company posted a second consecutive quarterly loss yesterday after adding provisions of RM777.3 million (US$247 million) for oil and gas projects, largely in the Middle East. This brought its total provisions to RM2.1 billion for its fiscal year ended June 30, it said.

The 100-year-old Malaysian company reported a fourth- quarter net loss of RM77.4 million, a reversal from a RM984 million-ringgit rofit a year earlier.

"Sime is currently under-owned by institutional funds due to the losses across the group's energy and utilities operations," Alex Goh, an analyst at AmResearch, wrote in a report today. "We believe that the stock is at an inflection point for an upward re-rating." -- Bloomberg