Maintain BUY on Sime Darby with our FV slightly lowered to RM11.00. The group’s 1QFY13 earnings were somewhat weaker than expected given that volume in the subsequent quarters will soften. Management’s newly announced lowball KPI of net profit of RM3.2bn puts our reduced FY13 forecast for RM3.86bn some 20% higher. Still, Sime has cut capex allocations for all key divisions, indicating an increasingly cautious outlook.
Not strong enough. Sime Darby’ annualised 1QFY13 results were in line with our and consensus forecasts. However, taking into consideration that the September quarter is usually a seasonally strong quarter and the subsequent quarters will likely be weaker, Sime’s 1Q core earnings of RM987.8m fell short of our full-year forecast. The industrial division was the only segment that saw stronger q-o-q numbers, propelled by robust new equipment sales in Australasia and contributions from Bucyrus.
Plantation weaker than expected. Sime recorded a 28.1% q-o-q growth in production, which should be sufficient to offset the weaker CPO price, which declined 11.4%. However, this was not the case as the segment’s EBIT sank 16.0% sequentially. The realised blended CPO price of RM2,707 per tonne represented a 8.1% drop compared with last year.
Cutting back capex. Sime has reduced its FY13 capex from RM7.75bn previously to around RM6.1bn across most of its divisions. Capex for the industrial segment was cut from RM1.8bn to RM1.1bn, while plantation capex was trimmed from RM3.0bn to RM2.6bn. The motor division’s capex was slashed by half to RM670.0m. This move reflects the group’s more cautious outlook for all divisions.
More lowball KPIs. Management announced its key performance indicators (KPI), with a target net profit of RM3.2bn, down from RM4.15bn in FY12. We believe the drastically lowered net profit forecast has too much buffer built in and should be easily surpassed.
Slight downward revision. We are adjusting downward our forecasts by 1.4% and 1.3% for FY13 and FY14 respectively, factoring in zero contribution from its downstream business, which continued to rack up losses. Based on our revised forecasts, we are trimming our FV to RM11.00, based on 16x CY13 earnings. Sime remains a BUY although its upside looks unexciting.
FYE June (RMm)
|
FY10
|
FY11
|
FY12
|
FY13f
|
FY14f
|
Revenue
|
32844.7
|
41858.8
|
47602.3
|
45280.7
|
48364.6
|
Net Profit
|
726.8
|
3681.5
|
4121.4
|
3859.8
|
4422.6
|
% chg y-o-y
|
-67.0
|
406.5
|
11.9
|
-6.3
|
14.6
|
Consensus
|
-
|
-
|
-
|
4136.0
|
4345.0
|
EPS
|
12.1
|
61.3
|
68.6
|
64.2
|
73.6
|
DPS
|
10.0
|
30.0
|
25.0
|
30.0
|
31.0
|
Dividend yield (%)
|
1.1
|
3.2
|
2.6
|
3.2
|
3.3
|
ROE (%)
|
3.4
|
16.6
|
16.5
|
14.2
|
15.0
|
ROA (%)
|
2.0
|
9.2
|
9.1
|
7.8
|
8.5
|
PER (x)
|
78.5
|
15.5
|
13.9
|
14.8
|
12.9
|
BV/share
|
3.40
|
4.00
|
4.33
|
4.73
|
5.09
|
P/BV (x)
|
2.8
|
2.4
|
2.2
|
2.0
|
1.9
|
EV/EBITDA (x)
|
-
|
-
|
9.1
|
10.2
|
9.0
|
Results Table (RMm)
FYE June
|
1Q13
|
4Q12
|
Q-o-Q chg
|
YTD FY13
|
YTD FY12
|
Y-o-Y chg
|
Comments
|
Turnover
|
11831.2
|
14122.1
|
-16.2%
|
11831.2
|
11063.6
|
6.9%
| |
EBITDA
|
1656.3
|
1733.0
|
-4.4%
|
1656.3
|
1784.6
|
-7.2%
| |
Depreciation
|
-322.8
|
-334.3
|
-3.4%
|
-322.8
|
-278.7
|
15.8%
| |
Net interest expense
|
-67.4
|
-69.0
|
-2.3%
|
-67.4
|
-29.6
|
127.7%
| |
Associates
|
20.0
|
47.3
|
-57.7%
|
20.0
|
15.5
|
29.0%
| |
PBT before EI
|
1286.1
|
1377.0
|
-6.6%
|
1286.1
|
1491.8
|
-13.8%
| |
EI
|
2.5
|
62.7
|
-96.0%
|
2.5
|
-26.1
|
Nm
| |
PBT
|
1288.6
|
1439.7
|
-10.5%
|
1288.6
|
1465.7
|
-12.1%
| |
Tax
|
-250.1
|
-276.9
|
-9.7%
|
-250.1
|
-356.2
|
-29.8%
| |
MI
|
-48.2
|
-63.7
|
-24.3%
|
-48.2
|
-20.6
|
134.0%
| |
Reported Net Profit
|
990.3
|
1099.1
|
-9.9%
|
990.3
|
1088.9
|
-9.1%
| |
Core Net Profit
|
987.8
|
1036.4
|
-4.7%
|
987.8
|
1115.0
|
-11.4%
| |
Core EPS (sen)
|
16.44
|
17.25
|
-4.7%
|
16.44
|
18.55
|
-11.4%
| |
DPS (sen)
|
0.0
|
25.0
|
0.0
|
0.0
| |||
EBITDA margin
|
14.0%
|
12.3%
|
14.0%
|
16.1%
| |||
NTA/share (RM)
|
4.33
|
4.48
|
4.33
|
4.16
| |||
Segmental
| |||||||
Revenue, RM'm
| |||||||
Plantation
|
2943.1
|
4662.9
|
-36.9%
|
2943.1
|
3212.5
|
-8.4%
| |
Property
|
370.8
|
644.4
|
-42.5%
|
370.8
|
418.9
|
-11.5%
| |
Industrial
|
4037.9
|
3607.1
|
11.9%
|
4037.9
|
3160.7
|
27.8%
| |
Motors
|
4071.1
|
4875.7
|
-16.5%
|
4071.1
|
3885.0
|
4.8%
| |
Energy & Utilities
|
300.5
|
222.1
|
35.3%
|
300.5
|
256.5
|
17.2%
| |
Healthcare etc.
|
107.8
|
109.9
|
-1.9%
|
107.8
|
130.0
|
-17.1%
| |
11831.2
|
14122.1
|
-16.2%
|
11831.2
|
11063.6
|
6.9%
| ||
EBIT, RM'm
| |||||||
Plantation
|
671.9
|
800.0
|
-16.0%
|
674.7
|
938.3
|
-28.1%
| |
Property
|
69.5
|
152.1
|
-54.3%
|
59.2
|
53.2
|
11.3%
| |
Industrial
|
382.4
|
359.9
|
6.3%
|
379.4
|
324.2
|
17.0%
| |
Motors
|
161.3
|
238.0
|
-32.2%
|
158.5
|
153.6
|
3.2%
| |
Energy & Utilities
|
58.2
|
22.0
|
164.5%
|
57.2
|
46.8
|
22.2%
| |
Healthcare etc.
|
16.5
|
43.2
|
-61.8%
|
10.8
|
5.8
|
86.2%
| |
1359.8
|
1615.2
|
-15.8%
|
1339.8
|
1521.9
|
-12.0%
| ||
Plantation statistics
| |||||||
FFB production
|
2.941
|
2.295
|
28.1%
|
2.941
|
2.783
|
5.7%
| |
- Malaysia
|
1.810
|
1.379
|
31.3%
|
1.811
|
1.843
|
-1.7%
| |
- Indonesia
|
1.130
|
0.915
|
23.5%
|
1.130
|
0.940
|
20.2%
| |
CPO production
|
0.703
|
0.575
|
22.3%
|
0.703
|
0.694
|
1.3%
| |
Realized CPO price
|
2707
|
3056
|
-11.4%
|
2707
|
2946
|
-8.1%
| |
EARNINGS FORECAST
FYE June (RMm)
|
FY10
|
FY11
|
FY12
|
FY13f
|
FY14f
|
Turnover
|
32844.7
|
41858.8
|
47602.3
|
45280.7
|
48364.6
|
EBITDA
|
5341.9
|
6612.6
|
6924.9
|
6193.4
|
7004.3
|
PBT
|
1741.5
|
5449.2
|
5625.8
|
5480.3
|
6284.2
|
Net Profit
|
726.8
|
3681.5
|
4121.4
|
3859.8
|
4422.6
|
EPS
|
12.1
|
61.3
|
68.6
|
64.2
|
73.6
|
DPS
|
10.0
|
30.0
|
25.0
|
30.0
|
31.0
|
Margin
| |||||
EBITDA (%)
|
16.3
|
15.8
|
14.5
|
13.7
|
14.5
|
PBT (%)
|
5.3
|
13.0
|
11.8
|
12.1
|
13.0
|
Net Profit (%)
|
2.2
|
8.8
|
8.7
|
8.5
|
9.1
|
ROE (%)
|
3.4
|
16.6
|
16.5
|
14.2
|
15.0
|
ROA (%)
|
2.0
|
9.2
|
9.1
|
7.8
|
8.5
|
Balance Sheet
| |||||
Fixed Assets
|
19128.3
|
19643.5
|
22749.1
|
23431.6
|
24134.5
|
Current Assets
|
18787.4
|
22427.0
|
25386.6
|
27085.7
|
29693.7
|
Total Assets
|
37926.2
|
42070.5
|
48135.7
|
50517.3
|
53828.2
|
Current Liabilities
|
11688.9
|
13168.7
|
16385.2
|
11561.3
|
12338.6
|
Net Current Assets
|
7098.5
|
9258.3
|
9001.4
|
15524.4
|
17355.0
|
LT Liabilities
|
5106.4
|
4847.9
|
4901.2
|
10020.3
|
8625.3
|
Shareholders Funds
|
20450.1
|
24030.3
|
26014.2
|
28395.2
|
30606.5
|
Net Gearing (%)
|
15.2%
|
9.0%
|
6.7%
|
4.7%
|
1.6%
|
Source: OSK
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