SIME (4197) : Sime Darby Bhd - A slow start to FY15
Target RM9.58 (Stock Rating: HOLD)
Sime's 1QFY6/15 core net profit was below, forming only 15% of our and 14% of consensus full-year estimates. The main negative surprise came from weaker industrial and plantation earnings. We cut our FY15-17 EPS forecasts by 5-12%, mainly to reflect the weaker industrial earnings and CPO prices, but maintain our SOP-based target price of RM9.58. The weaker earnings are offset by a potential 1-2% earnings upside from the conditional acquisition of New Britain Palm Oil Ltd and the potential planned listing for some of its key businesses. As such, we are keeping our Hold rating on the stock
Key results highlights
1QFY15 core net profit (excluding a gain of RM55m from the sale of its E&O stake) fell by 9% yoy, as higher contributions from plantations and motor segments were not sufficient to offset the weaker performance from industrial. The biggest drop in earnings came from the industrial division, which recorded a 42% yoy slump in earnings due to lower profit from Australia and Singapore. Plantation earnings grew by 21% yoy due to higher FFB output (1QFY15: +2% yoy) and lower operating costs. Property earnings jumped 135% yoy, thanks to a RM55m gain from the sale of its E&O stake. 1QFY15 core net profit fell by 46% qoq as all of the key divisions except for energy and utilities posted weaker contributions. As expected, no dividend was declared.
It set new KPI targets
The group unveiled its FY15 KPIs of an 8.5% ROE and RM2.5bn net profit, lower than the RM2.9bn that we and RM3bn that consensus were going for before the 1Q results announcement. We gathered that its net profit target assumes an average CPO price of RM2,350 per tonne and lower industrial earnings.
Key briefing highlights
In the results briefing, the group said that it expects the motor as well as energy & utilities divisions to do better in FY15. However, other divisions are expected to face significant challenges and their earnings may contract. The group will also review its capex spending in view of the weaker earnings prospects. As for the NBPOL acquisition, the group is confident of securing a 51% or more stake in the company, although it is still subject to NBPOL’s shareholders and authorities’ approvals.
Source: CIMB Daybreak - 01 December 2014
Target RM9.58 (Stock Rating: HOLD)
Sime's 1QFY6/15 core net profit was below, forming only 15% of our and 14% of consensus full-year estimates. The main negative surprise came from weaker industrial and plantation earnings. We cut our FY15-17 EPS forecasts by 5-12%, mainly to reflect the weaker industrial earnings and CPO prices, but maintain our SOP-based target price of RM9.58. The weaker earnings are offset by a potential 1-2% earnings upside from the conditional acquisition of New Britain Palm Oil Ltd and the potential planned listing for some of its key businesses. As such, we are keeping our Hold rating on the stock
Key results highlights
1QFY15 core net profit (excluding a gain of RM55m from the sale of its E&O stake) fell by 9% yoy, as higher contributions from plantations and motor segments were not sufficient to offset the weaker performance from industrial. The biggest drop in earnings came from the industrial division, which recorded a 42% yoy slump in earnings due to lower profit from Australia and Singapore. Plantation earnings grew by 21% yoy due to higher FFB output (1QFY15: +2% yoy) and lower operating costs. Property earnings jumped 135% yoy, thanks to a RM55m gain from the sale of its E&O stake. 1QFY15 core net profit fell by 46% qoq as all of the key divisions except for energy and utilities posted weaker contributions. As expected, no dividend was declared.
It set new KPI targets
The group unveiled its FY15 KPIs of an 8.5% ROE and RM2.5bn net profit, lower than the RM2.9bn that we and RM3bn that consensus were going for before the 1Q results announcement. We gathered that its net profit target assumes an average CPO price of RM2,350 per tonne and lower industrial earnings.
Key briefing highlights
In the results briefing, the group said that it expects the motor as well as energy & utilities divisions to do better in FY15. However, other divisions are expected to face significant challenges and their earnings may contract. The group will also review its capex spending in view of the weaker earnings prospects. As for the NBPOL acquisition, the group is confident of securing a 51% or more stake in the company, although it is still subject to NBPOL’s shareholders and authorities’ approvals.
Source: CIMB Daybreak - 01 December 2014
