Sime Darby continues climb as plantations, property fall

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KUALA LUMPUR (Dec 4): Sime Darby Bhd, in its pure play form, saw a further strengthening of its share price today as its investors were convinced the stock deserves to be traded at higher valuations.

Ivy Ng, head of equity research at CIMB Research, said that buying interest in Sime Darby was most likely driven by the market’s belief that the stock is currently trading below its warranted price-earnings ratio (P/E) at 19.8 times.

The market could also have been eyeing Sime Darby for an outstanding 17 sen per share dividend, which had gone ex-dividend at 12.30pm today.

At 12pm today, shares in Sime Darby had strengthened to stand nine sen higher at RM2.27.

However, its newly-listed Sime Darby Plantation (SD Plantation) and Sime Darby Property (SD Property) recorded selldowns, with SD Plantation declining 14 sen to RM4.87, and SD Property down seven sen to RM1.13.

“The plantations arm has typically traded at higher valuations, so that might explain why investors have expressed more interest in Sime Darby,” Ng told today.

Meanwhile, the removal of Sime Darby Property from the list of FBM KLCI component stocks could be a factor for its selldown, as fund managers adjust their portfolios to better reflect the index’s composition, Ng said.

“There are concerns about whether or not Sime Darby Property’s gains could be sustained, going forward,” Ng added. 

SD Property had reported a doubling of net profit for its first quarter ended Sept 30, 2017, led by gains on disposal of Malaysia Land Development Co Bhd and its 40% stake in Seriemas Development Sdn Bhd.

Last Thursday (Nov 30), the plantations and property arms were listed as separate entities from the holding company. Sime Darby had then seen its share price surge 27% to close at RM2.35, versus its listing reference price of RM1.85.

On the other hand, Sime Darby Plantation ended at RM5.01, compared with its issue price of RM5.59, with Sime Darby Property closing at RM1.20 against its issue price of RM1.50.