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SIME DARBY BERHAD
Sime Darby Berhad is a global trading and logistics player. The group partner with some of the world’s best brands to deliver quality products and services to our customers. The group core businesses operate in and serve the industrial, motors and logistics sectors as well as the healthcare, insurance, and retail segments.
Current Price : RM2.43
Kim's Target Price:
TP1: RM2.70 (Undervalued -28%)
TP2: RM3.40 (Fair Value)
(TP: 0.10 - 0.15 cents)
KIM'S 10 KEYS -
01. Trading at 27.8% below our estimate of its fair value.
02. Earnings grew by 29.3% over the past year.
03. Less volatile than 75% of MY stocks over the past 3 months.
04. Exceeded the MY Industrials industry which returned 25.8% over the past year.
05. Had RM1.33b of debt in December 2020, down from RM3.89b, one year before. But on the other hand it also has RM1.82b in cash, leading to a RM489.0m net cash position.
06. Had liabilities of RM9.39b due within a year, and liabilities of RM2.14b falling due after that.
07. Liabilities totalling RM5.18b more than its cash and near-term receivables.
08. Current net profit margins (3.1%) are higher than last year (2.5%).
09. Earnings growth over the past year (29.3%) exceeds its 5-year average (-4.9% per year).
10.Dividend payments are covered by earnings. Dividend (4.08%) is higher than the bottom 25% of dividend payers in the MY market (1.38%).
NEWSBREAK & FORECAST -
1. Sime Darby is considering several options for the proceeds from the sale of its remaining 10.89% stake in Eastern & Oriental (E&O), including a special dividend to its shareholders. All options remain open at this stage on the use of proceeds, which may be utilised for capex, loan repayment, working capital, or special dividend.
2. Sime Darby has entered into a Sales & Purchase agreement with Amazing Parade Sdn Bhd (owned by Datuk Tee Eng Ho & family of Kerjaya Prospect group) for the disposals of its 10.89% investment stake in E&O for a cash consideration of RM93.5m (based on RM0.60/share or 0.5x P/B as at Dec 2020).
3. Sime Darby will continue to leverage on Australia’s mining sector and recovery of China market to sustain earnings. We also expect a continued decent dividend yield of 4.3% for the year.
4. Sime Darby bought into E&O in 2011. The disposal is aligned to SIME’s on-going efforts to rationalise its non-core assets since the demerger with SIME Property and SIME Plantation.
PREDICTION NEWS - (Foreign luxury carmaker to invest in Malaysia)
01. My views and predicting (It's PORSCHE), the investment will be testament to Malaysia’s capabilities as it will demonstrate the luxury sports car brand’s confidence in the country’s ability to produce a high-quality product.
02. The partnering with Inokom Corporation, a subsidiary of Sime Darby Motors, which is Sime Darby’s automotive arm.
03. Inokom will construct a new plant specifically for Porsche in Kedah, in the north of Peninsular Malaysia.
04. This investment making Malaysia its Southeast Asian hub and very good positive news for Malaysian automotive sector.
LOCAL INSTITUTION TARGET PRICE -
1. PUBLIC BANK - RM2.78
2. AMINVEST - RM2.86
3. HLG - RM2.68
4. KENANGA - RM2.55
5. AFFINHWANG - RM2.57
01. Sime Darby's operations are in countries/territories that are not subjected to significant movement restrictions and the recovery in motor vehicle sales has generally been strong.
02. Sime Darby's Motor vehicles sales continued to be on strong recovery path despite minor setback in global supply chain that may limit sales.
03. Sime Darby's increased infrastructure spending from fiscal stimulus measures by various countries should support equipment sales for the Industrial division. Its Port operation continued to face competition from other ports especially with the Chinese government rationalizing ports operations to create a larger port entity.
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