Sime Darby slides to near two-year low after poor 3Q result, lower KPI



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KUALA LUMPUR: Heavyweight Sime Darby Bhd’s counter took a beating, following weak third-quarter fi nancial year 2015 (3QFY15) results that led to lower revision of its key performance indicator (KPI) targets.

Share prices in the diversifi ed conglomerate have so far retreated near its two-year low of RM8.43 in early February last year.

Sime Darby (fundamental: 0.8; valuation: 0.4) lost eight sen or 0.9% to close at RM8.49.

Analysts appeared coy on whether investors, in the short term, should accumulate the stock or dispose to cut losses.

Public Investment Bank Research analyst Chong Hoe Leong said Sime Darby may not have bottomed out yet. “It can be cheaper,” he said, noting it is currently trading at 20 times price-earnings ratio.

A research analyst, who declined to be named, said her recommendation “depends on the coming quarter performance.”

She expects Sime Darby’s plantation segment to continue to be disappointing given the lower crude palm oil (CPO) prices. Her forecast for CPO prices

stood at RM2,200 per tonne on average for the year.

But both analysts agreed that contributions from newly-acquired New Britain Palm Oil Ltd will help drive plantation earnings.

Over the next one to two years, Chong believes the group’s fi nancial performance will bounce back, likewise its share price.

Last Friday, Sime Darby president and group chief executive Tan Sri Mohd Bakke Salleh announced the group is unlikely to meet its headline KPI target of a net profi t of RM2.5 billion for FY15 and a return on equity of 8.5%.

Th e group is now hoping to close FY15 with a net profi t of RM2 billion to RM2.1 billion, he told reporters.

Sime Darby’s (fundamental: 1; valuation: 1.1) net profi t fell 55% to RM386.04 million for 3QFY15, from RM852.53 million a year ago, while revenue was largely fl at at RM10 billion from RM10.1 billion.

For the nine-month period, net profi t was down 39% to RM1.32 billion from RM2.16 billion a year ago. Revenue contracted 1.7% to RM30.86 billion from RM31.39 billion for the same period.


This article first appeared in The Edge Financial Daily, on May 28, 2015.