KUALA LUMPUR (July 3): Hong Leong Investment Bank (HLIB) Research expects Sime Darby Bhd to declare a final dividend payout of eight sen per share, bringing its total dividends for the financial year ended June 30, 2020 (FY20) to 10 sen, as its management remains committed to its dividend policy.
The total is comparable with its FY19 payout, which would translate into an attractive 4.8% dividend yield for FY20, said HLIB Research analyst Daniel Wong in a note today.
He has also kept his estimates for Sime Darby's FY20 earnings at RM1 billion while raising the group's FY21 and FY22 earnings by 9.9% and 2.7% respectively, on the improved motor segment's outlook for both China and Malaysia.
Wong has maintained his "buy" call on the group but upped the target price to RM2.55 from RM2.25 previously on adjusted earnings.
"Sime Darby will continue to leverage on Australia's mining sector to sustain profits in the near term while riding on the recovery of the China market as well as Malaysia's automotive market, which may cushion the short-term negative impact of Covid-19," he said.
Meanwhile, Malaysia's car sales are expected to improve following the full and partial exemption of sales and service tax on passenger vehicles and Penjana (National Economic Recovery Plan) measures for the second half of calendar year 2020.
According to Wong, its management indicated that BMW Malaysia has already distributed its usual RM120 million dividend to Sime Darby, which will be recognised as dividend income to the group.
"However, the industrial equipment segment is likely to remain slow, pending government announcement of new megaprojects," he added.
As for its asset monetisation, Tesco's disposal exercise remains on track to be completed by the fourth quarter of financial year 2020.
"The monetisation of MVV land [in Seremban] can only be materialised when the government proceeds with the high-speed rail project. On the China ports operation, management indicated they are not in a hurry to monetise the operations, as the market valuation at current juncture is unattractive," he said.
As at 10.51am, shares in Sime Darby had risen six sen or 2.47% to RM2.15, valuing the group at RM14.22 billion. It saw some 587,100 shares traded.