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Date : 31 March 2021
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)
Warrant: SIME-C47
(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
CONCLUSION -
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.
Lastly,
don't forget to click on our telegram links and join us. Let us give
you the latest update on the stock market and our group development. We
hope you enjoy reading our blogs and give us your support.
If
you would like to know more about Kim's Group Trader (KGT) and Kim's
Investment Club (KIC). You may reach out to us via links.
LETS JOIN KIM'S STOCKWATCH GROUP?
Official Telegram : https://www.telegram.me/kimstock
Official Website : http://www.kimstockwatch.com/
KGT Subscribe : https://www.telegram.me/kimstockwatch
Best Regards,
KIM
Disclaimers: The research, information and financial opinions expressed in this article are purely for information and educational purpose only. We do not make any recommendation for the intention of trading purposes nor is it an advice to trade. Although best efforts are made to ensure that all information is accurate and up to date, occasionally errors and misprints may occur which are unintentional. It would help if you did not rely upon the material and information. We will not be liable for any false, inaccurate, incomplete information and losses or damages suffered from your action. It would be best if you did your own research to make your personal investment decisions wisely or consult your investment advise.
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