Period 1Q13
Actual vs. Expectations
SIME’s 1Q13 core net profit* of RM965m
came in within both the consensus and our expectations. It made up 23% of the
consensus’ FY12 forecast of RM4.14b and 24% of our forecast of RM3.94b.
Dividends No
dividend was announced as expected.
Key Results Highlights
YoY, SIME’s 1Q12 core net profit
declined 3% to RM965m. Despite the good performance from the industrial
division (EBIT +17% to RM379m) and motor division (EBIT +3% to RM159m), significantly
lower earnings from the plantation division (EBIT -28% to RM675m) dragged down the
overall earnings. The average CPO price was at RM2707 (-8%) despite a higher
FFB production of 2.94m mt (+6%). Operating cost may have increased more than
10% in view of the higher fertiliser and wage costs.
QoQ, SIME’s 1Q12 core net profit declined 12% to
RM965m. Despite the good performance of the industrial division (EBIT +5% to
RM379m), significantly lower earnings from plantation division (EBIT -16% to
RM675m) dragged down the overall earnings. The average CPO price was at RM2707
(-11%) despite a higher FFB production of 28% to 2.94m mt. In addition, the midstream
and downstream segment suffered a loss of RM25m (4Q12: RM3m gain).
Outlook SIME has announced its FY13 KPI of RM3.2b in net
profit** (FY12 KPI: RM3.3b) and a ROE of 12.0% (FY12 KPI: 13.3%). We believe
the lower target may be attributed to the expectation of lower CPO prices for
FY13. This is in line with our FY13E CPO price estimate of RM2850 (-4% YoY).
Change to Forecasts We
have reduced our FY13E-FY14E earnings by 7% each to RM3.68b-RM3.83b. This is in
line with our lower average CPO price assumptions for CY13-CY14 of RM2850/mt
for each of the years (previously RM3000/mt).
Rating Maintain MARKET PERFORM
Unexciting FY13E
earnings growth should keep its share price upside limited.
Valuation We have lowered our TP to RM9.00 (from RM9.80
previously) based on Sum-Of-Parts with the plantation division valued at 17.5x
Fwd PER.
Risks A
sustained drop in CPO prices.
Worse than expected
margins from the other non-plantation divisions.
Source: Kenanga
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