Sime  Darby  announced  that  following  the  expiry  of  the  exclusivity  period under the Exclusivity Agreement  with Kulim (Malaysia) on 28 September 2014,  it  has  decided  not  to  proceed  further  at  this time  on  the  proposed acquisition  of  Kulim  (Malaysia)’s  shares  in  New  Britain  Palm  Oil  Limited. (Source: Media) Comment:  Other  than  the  expiry  of  the  exclusivity  period,  Sime  had  not given any reasons for its decision “not to proceed further at this time on the proposed acquisition of Kulim (M) Berhad’s shares in N ew Britain Palm Oil Limited.”

Recall  that  we  said  on  1  August  2014  that  a  final  deal  around  the  then stock  price  of  £5.19  can  be  EPS-enhancing  as  the  implied  acquisition CY15 PE of 14.4x was comparable to Sime’s then. Key to enhancing the earnings of NBPOL after acquisition is for Sime to assume full operational and management control. It was reported earlier that Kulim decided to sell its 49.0% stake in NBPOL as it had not been able to exert full management control  and  has  not  been  able  to  secure  approval  to  raise  its  stake  in NBPOL.

We maintain our forecasts, target price of RM9.31 and REDUCE rating for SIME.

Source: HwangDBS Research - 1 Oct 2014