Nomura Research retains buy for Sime Darby, unchanged TP RM3.02

KUALA LUMPUR: Nomura Global Markets Research is maintaining its buy call on Sime Darby, with an unchanged sum-of-parts derived target price of RM3.02, implying FY19F price-to-earnings (P/E) of 20 times, which is above peers’ average of 14 times. 

“We believe the premium is warranted given Sime’s status as one of the largest BMW and Caterpillar dealers in Asia-Pacific and its earnings growth trajectory, which we estimate will grow by 22% on-year in FY19F,” it said in a research note.

Nomura Research said underpinning its forecast was the upcycle in mining activities, driving its industrial division earnings. In addition, it also expects motor earnings to exhibit growth, driven by the pipeline of new launches across all its dealership market.

It pointed out that Caterpillar (CAT) delivered a 3Q18 strong EPS and sales and continues to maintain its earnings guidance, emphasising that there have been no external factors that would require a revisit to its profit guidance and maintaining its optimism towards 2019.
 
“In a nutshell, we believe CAT’s earnings read-across would be a positive on Sime’s industrial earnings trajectory moving forward. We maintain our Buy call with our TP unchanged at RM3.02,” it said.