Sime Darby (Hold; TP: RM9.82)
Beats expectations
- 1HFY12 core net profit of RM2.16bn (+39.4%) beat expectations, accounted for 59.5% of our full-year forecast and 55% of consensus full-year estimates.
- Key variances are: (1) Higher-than-expected earnings contribution for the industrial segment; and (2) Lower-than-expected effective tax rate.
- FY12-14 core net profit forecasts raised by 8.9-12.9%, largely to reflect: (1) Slightly higher FFB yield assumption for its Malaysian estates; (2) Higher sales at its industrial segment (particularly, in Australia to account for the larger product range following its recent acquisition of Bucyrus); and (3) Lower effective tax rate assumption.
- SOP-derived TP for Sime is raised by 4% to RM9.82, to reflect the upward revision in our earnings forecasts. Despite our Hold recommendation on the stock remains unchanged, we believe share price performance will likely sustain in the near-term, given: (1) The pending listing of FGV potentially at high valuations and (2) The recent geopolitical tension in Iran (which has resulted in higher crude oil prices and this may eventually result in higher palm oil prices).
Source: HLIB Research 1 March 2012
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