Sime Darby - FY12 result within expectation

Period    4Q12 and FY12

Actual vs. Expectations

 The FY12 core net profit* of RM4.00b came in within both the consensus and our expectations. It came in on the dot of the consensus’ FY12 forecast of RM4.01b and ours of RM4.02b.

Dividends   As expected, a final single tier dividend of 25.0 sen was announced. Combined with its earlier 1st interim dividend of 10.0 sen, FY12 total dividend amounted thus to 35.0 sen or a 3.6% yield. 

Key Results Highlights

 YoY, FY12 core net profit increased 4% to RM4.00b. Better EBITs in the industrial division (+27% to RM1.33b) and motor division (+11% to RM694m) was neutralised by a significant jump in corporate expenses (+RM162m to RM227m). The plantation and property divisions’ EBITs were generally flattish.

 QoQ, the 4Q12 core net profit jumped 21% to RM1.10b as CPO prices rose 5% to RM3056/mt and FFB volume rose 12% to 2.30m mt.

Outlook   Our flattish CPO prices outlook at RM3150-RM3100 for CY12-CY13 will keep the overall group’s FY13E earnings growth limited at 4%. 

 Medium to long term prospect for the plantation division remains positive as SIME aims to own 1m ha of plantation land by 2015 according to media reports. (See next page for more comments).

Change to Forecasts

 Maintaining FY13-14E earnings of RM4.11bRM4.29b based on FFB productions of 10.7m-11.4m mt and CY12-CY13E CPO price assumptions of RM3150-RM3100.

Rating  Maintain MARKET PERFORM

 Limited FY13-14E earnings growth of 3%-5% should keep the upside limited.

Valuation    Maintaining TP of RM10.30 based on Sum-OfParts with the plantation division valued at FY13E PER of 17.5x. (Refer page 3 for details).

 Our 17.5x PER is based on the average Target PER for other big cap planters in the KLCI.

Risks   Sustained drop in CPO prices.

 Worse than expected margin for non-plantation divisions.  

Source: Kenanga