Sime Darby Bhd
(Nov 17, RM9.65)
Maintain “hold” with a target price (TP) of RM8.30: According to media highlights, Sime Darby’s (Sime) automotive arm is set to list in the second half of 2015 (2H15) and one potential sweetener in the pipeline is the assembly of British marques Jaguar and Land Rover.

According to industry sources, Sime is proposing to use its plant in Kulim to assemble two Jaguar and two Land Rover models. Locally assembling models will make them cheaper due to lower taxes imposed on locally-assembled models, which is likely to boost the sales of Land Rover (January to September 2014: 635 units sold) and Jaguar. (Source: The Edge)

This news is not a surprise to us as we have highlighted in our previous note that Sime is looking to expand the distributorship of its motor division ahead of the potential listing of its motor division. The assembling of Land Rover and Jaguar models is unlikely to contribute significantly to Sime. For the financial year 2014 (FY14), the motor division contributed a total revenue of RM17.7 billion and profit before interest and tax (PBIT) of RM635 million (15% of Sime FY14 earnings before interest and tax) vs Land Rover (Malaysia)’s revenue of RM279 million and profit after tax (PAT) of RM9.7million. — UOB KayHian Research, Nov 17

This article first appeared in The Edge Financial Daily, on November 18, 2014.