Sime  Darby,  whose  FY13  earnings  were  within  our  forecast  but  below consensus’,  is  one  of  the  few  plantation  names  to  have  met  our estimates. Management seems to be more cautious going forward, with the  only  beacon  of  light  being  the  property  division.  We  maintain  our BUY  recommendation, with our SOP-based  FV  adjusted  slightly  higher to MYR10.73 (from MYR10.70).  
 
- In line with ours estimate but below consensus.  Sime Darby’s FY13 core  net  profit  was  in  line  with  our  but  below  consensus  estimates, coming in at 99% and 95% of forecasts respectively. The group recorded a  net  EI  gain  of  MYR363.8m  in  4QFY13,  mainly  arising    from  a MYR340m gain on sale of its 50% stake in Sime Darby Healthcare to a JV company, Ramsay Sime Darby Healthcare. Sime declared a final net DPS  of  27  sen  (4Q12:  25  sen),  bringing  its  FY13  net  DPS  to  34  sen (FY12:  25  sen).  This  translates  into  a  net  dividend  payout  of  55%  and net yield of 3.65%.  

- Briefing  takeaways:  i)  Sime’s  dividend  reinvestment  plan;  ii)  FFB growth projected at 5% for FY14; iii) production costs 6-7% lower y-o-y in FY13 while that for FY14 may be flat to slightly higher; iv) its only beacon of light is the property division;  v) industrial division still holding up; and vi) cautious tone at motor division.

- Slight tweaks to forecasts. We are tweaking our forecasts for FY14 by -0.9% and introduce our FY15 estimates. 

- Maintain  Buy.  Post-earnings  revision  and  after  rolling  forward  our valuation period as well as updating for Sime’s latest net debt, we tweak slightly  higher  our  SOP-based  FV  to  MYR10.73  (from  MYR10.70).  We maintain  our  Buy  recommendation  on  the  stock  as  we  believe  Sime, being  an  integrated  player  with  stable  contributions  from  the  non-plantation  related  industries,  would  have  an  earnings  buffer  during  a CPO  price  downturn,  while  its  valuations  -  at  a  2-3x  P/E  discount  to  its peers - are undemanding.

Source: RHB