KUALA LUMPUR: AmResearch has maintained its Buy on Sime Darby with a fair value of RM11.20 a share, which is a 10% discount to its sum-of-parts value of RM12.45 a share.
Sime Darby has aborted its plan to acquire a 49% stake in New Britain Palm Oil Ltd (NBPOL) from Kulim (M) Bhd after holding exclusive talks with the latter.
In a statement on Tuesday, Sime Darby said it had decided at this time not to proceed further in relation to the proposal following the expiry of the exclusivity period. No detail was given.
AmResearch believed the stumbling blocks could have to do with pricing and questions over Sime Darby’s ability to exert control over NBPOL, which is now largely independently managed apart from Kulim.
"We are neutral over this latest development. At the current price of GBP4.175/share, NBPOL is trading at a PE of 16 times the consensus FY14F EPS of GBP0.26/share.
"At a premium of between 30% and 50% over the current price (GBP5.40-GBP6.30/share), NBPOL would be valued at 21 times and 24 times its FY14F EPS – which is on the steep side," it said.
This would have translated into a purchase price of between RM4.3bil and RM5.0bil for Sime Darby to assume full control of NBPOL, said AmResearch.
It had been speculated that the transaction may not have obtained the nod from other stakeholders if the price was below GDP6.00/share.
"Sime Darby’s plantation growth prospects still rest significantly on its Liberian operations, which have come to a halt due to the Ebola outbreak.
"Nonetheless, we believe the long-term prospects remain intact, and the stock will benefit from any upticks in CPO prices. Other catalysts include the potential listing of its auto division," it said.
Limited time offer:
Just RM5 per month.
