INVESTMENT HIGHLIGHTS

• 3 months ending Sep result missed expectation

• 3MFY18-EndDec CNP declined 66%yoy to RM123m

• Earnings estimate reduced

• Maintain NEUTRAL with lower TP of RM5.10

3 months ending Sep result missed expectation: Sime Darby Plantation Berhad Group (SIMEPLT) Core Net Profit (CNP) for the 3 months period of 1-July-2018 to 30-Sep-2018 (3MFY18-EndDec) is at RM123m. Adjusted for FY19 (only for comparison purpose), 3MFY18- EndDec CNP missed expectation as it accounts only for 10%/12% of consensus/our full year earnings estimate. The negative deviation is caused by lower than expected FFB volume for Malaysia estates. For our FY18 CNP calculation, we have excluded RM14m gain on disposals, RM13m write-offs, forex loss of RM7m and impairments of RM2m. As expected, no dividend was announced.

3MFY18-EndDec CNP declined 66% yoy to RM123m. Earnings declined in line with lower CPO price which tumbled 21% yoy to RM2117 per tonne in 3MFY18-EndDec.

Earnings estimate reduced. FY19 core earnings have been reduced by 7% to RM956m after assuming lower FFB volume for Malaysia estates.

Maintain NEUTRAL with lower TP of RM5.10: The decline in TP is in line with lower earnings estimate for FY19. Our Target Price is based on Sum-Of-Parts based valuation. Maintain NEUTRAL on the stock as we believe that the strong fundamental of SIMEPLT has been priced in into its high Forward PE.

Source: MIDF Research - 26 Nov 2018