In a filing with Bursa Malaysia yesterday, Sime Darby said SDE had on Feb 5 received a notice from the Dubai International Arbitration Centre (DIAC) that EMAS had submitted a request for arbitration against SDE which was filed on Jan 24, 2016. The amount that EMAS is seeking from the arbitration proceedings is AED41.04mil (about RM46.37mil).
KUALA LUMPUR: CIMB Equities Research expects Sime Darby to deliver stronger earnings in FY17, starting July 1, 2016, due to higher crude palm oil (CPO) price and contribution from the UK property Battersea project.
It said on Wednesday Sime’s industrial division earnings would likely to stabilise after it right-sized its operations while motor could benefit from new models launches. The group also revealed it plans to unlock land value and look for growth opportunities.
“We raise our FY17-18F earnings by 4%-5% mainly to reflect stronger downstream and motor earnings. Our sum-of-parts based target price rises to RM8.20 per share as we roll over our target price to end-17. However, we maintain our Hold call for its supportive dividend yield and rich assets,” it said.
Sime Darby’s final core net profit (excluding one-off gains and tax credit) fell 39% on-year due to weaker performances from all divisions, except motor. Core net profit was below the research house and market expectations as it accounted for only 85% and 84% of consensus numbers.
The weaker results were due mainly to lower-than-expected industrial earnings. The consolation is the final dividend of 21 sen was above the forecast of 10 sen dividend.
CIMB Research said the final reported earnings of RM2.41bil were 24% above its forecast and 21% above Sime’s KPI target of RM2bil due to several one-off gains. Gains included a RM447mil gain from the sale of two subsidiaries in Singapore; RM145mil gain from compulsory land acquisition; and RM185mil gain from the disposal of land in Semenyih. It also booked a special tax incentive of RM348.5mil from fixed assets revaluation in Indonesia.
Sime announced that it plans to place out new shares of up to 5% of its share capital via an accelerated book building to be completed by end-2016. The exercise will be subject to shareholders’ approval and could raise up to RM2.38bil, based on the indicative placement price of RM7.51 per share.
“We estimate the placement could dilute FY17 EPS by 5% and cut the group’s net gearing to 29% from 35% as at end-June,” it added.
CIMB Research said Sime embarked on a deleveraging exercise in 2015 after its net gearing jumped to 51% after New Britain Palm Oil acquisition. So far, the group has disposed two Singapore subsidiaries for RM601mil, issued RM2.2bil perpetual sukuk, and sold land in Semenyih for RM254.4m. It is also planning to inject industrial assets in Australia into Saizen REIT, and place out 5% of its shares which we estimate could raise total proceeds of RM3bil,” it said.
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