INVESTMENT HIGHLIGHTS

• Illustrative market cap announced

• Neutral on the news

• Earnings forecast maintained

• Maintain NEUTRAL with TP of RM9.25

Illustrative market cap announced. Sime Darby Berhad (SIME) has announced the illustrative market cap (ILM) for Sime Darby Plantation, Sime Darby Property and the future SIME post demerger. Sime Darby Plantation's ILM is in the range of RM36.9b to RM41.8b. For Sime Darby Property, the ILM is in the range of RM9.9b to RM11.7b. Lastly, the future SIME ILM is in the range of RM8.0b to RM14.8b. Refer Table 1 for details.

Neutral on the news. Although Sime Darby Property ILM came in higher than expected, this is neutralized by lower than expected Sime Darby Plantation ILM.

Earnings forecast maintained. The details announced does not change the fundamentals of respective companies, hence we maintain our FY18/FY19 core earnings forecast of RM2.42b/RM2.43b respectively.

Maintain NEUTRAL with TP of RM9.25. Our Target Price is based on Sum-Of-Parts based valuation. While SIME valuation at 25.0x PE appears to be high, its share price is supported by decent dividend yield of 2.7% and the expectation of value creation from the demerger corporate exercise.

Source: MIDF Research - 7 Nov 2017