RHB Research retains bearish view on Sime Darby’s outlook
Posted on May 4, 2013, Saturday
KUALA LUMPUR: RHB Research Institute Sdn Bhd (RHB Research) has retained its ‘buy’ call on Sime Darby Bhd (Sime Darby) with a target price of RM10.60 per share, despite the gloomy outlook for the group’s plantation business.
The prevailing crude palm oil (CPO) prices will have a negative impact on Sime Darby’s earnings, given that the segment made up 50 to 55 per cent of its earnings.
However, this would be partially offset by its other businesses.
“For the fi rst half of its fi nancial year ending June 30, 2013, the motor division, comprising 12 to 15 per cent of the group’s earnings, posted a six per cent year on year decline in earnings before interest and taxes.
“However, this is expected to turn around to a positive fi ve to 10 per cent growth for the whole 2013 financial year,” RHB Research said in a note yesterday.
The research house said sales volumes in China, for the division, had also improved in the last few months.
The anticipated slowdown in its plantation division will also be cushioned by stable earnings from its industrial division, comprising 20 to 25 per cent, as well as its property division, which makes up six to eight per cent.
“At this juncture, we maintain our earnings forecast for the group.
But, should CPO prices average at RM2,400 per tonne during the group’s fi nancial year ending June 30, 2013, the earnings estimates will be revised down by 12.3 per cent,” RHB Research added. — Bernama