KUALA LUMPUR (Jan 12): RHB Research Institute has lowered its sum-of-parts target price for SIME DARBY BHD [] to RM10.40 from RM10.65, post earnings revision.
It said on Thursday that it is maintaining its Outperform call on the stock. Although earnings growth for Sime may not be too exciting, it believes that PE valuations for the stock of 13 times to 13.5 times are at an unjustified discount to peers at 15 times to 17 times.
“In addition, with a dividend policy to pay out at least 50% of net earnings, we believe Sime’s net yields of 3%-4% p.a. provide a relatively decent and stable return for investors,” it said.
RHB Research said its key takeaways from a briefing by Sime Darby were whether the conservative CPO production growth targets were likely to be surpassed.
While Sime Darby’s downstream division is bleeding but once Indonesian refinery is operational, things should improve, said the research house. However, it noted that the new planting in Liberia is behind schedule.
Other positive takeaways were the heavy equipment division in the form of Bucyrus acquisition; the resilient sales in the motor division while its property marketing strategy was appealing to the right target market in the property sector.
“We have revised our forecasts by -2.9% to +1.3% for FY12-14. We are maintaining our Malaysian CPO price assumptions at RM3,150/t for FY06/12 and RM2,900/tonne for FY13,” it said.
It said on Thursday that it is maintaining its Outperform call on the stock. Although earnings growth for Sime may not be too exciting, it believes that PE valuations for the stock of 13 times to 13.5 times are at an unjustified discount to peers at 15 times to 17 times.
“In addition, with a dividend policy to pay out at least 50% of net earnings, we believe Sime’s net yields of 3%-4% p.a. provide a relatively decent and stable return for investors,” it said.
RHB Research said its key takeaways from a briefing by Sime Darby were whether the conservative CPO production growth targets were likely to be surpassed.
While Sime Darby’s downstream division is bleeding but once Indonesian refinery is operational, things should improve, said the research house. However, it noted that the new planting in Liberia is behind schedule.
Other positive takeaways were the heavy equipment division in the form of Bucyrus acquisition; the resilient sales in the motor division while its property marketing strategy was appealing to the right target market in the property sector.
“We have revised our forecasts by -2.9% to +1.3% for FY12-14. We are maintaining our Malaysian CPO price assumptions at RM3,150/t for FY06/12 and RM2,900/tonne for FY13,” it said.
