Sime Darby's disposal of E&O will have minimal earnings impact

KUALA LUMPUR: The disposal of Eastern & Oriental Bhd (E&O) by Sime Darby Bhd's subsidiary Sime Darby Nominees Bhd is a positive move as it is a non-core asset and will have little earnings impact on the group, said Kenanga Research.

"Based on SIME’s recent 6MFY21 results, E&O contributed share of profit at RM12m, or 1% of our FY21E CNP, which has fairly minimal impact to the group earnings and NTA position (less than 1.0 sen)," it said in a note.

The research house said the disposal price, which works out to 0.5x price-book, is fair as compared to the ascribed price-book of 0.48x and taking into account the deceleration of E&O's business activities, especially during the pandemic.

E&O sank into losses of RM196mil in FY20 compared to a profit of RM61.9mil for FY19 with lower sales with the completion of several development projects.

For 9MFYE March 2021, E&O continued to record lower sales and lower profit especially under the pandemic situation.

Sime Darby Nominees will be disposing of its entire 10.89% stake in E&O to Amazing Parade Sdn Bhd for RM93.5mil cash or 60s en per share.

This represents a 33% premium over the consensus target price of 45 sen per share and 3% over the last traded price of 58.5 sen per share.

Kenanga reiterated "outperform" on Sime Darby with a higher sum-of-parts target price of RM2.55, up from RM2.40 previously, we it rolled over its valuation base year to 2022, which implies price-earnings ratio of 14x on FY22 earnings per share.
Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Next In Business News

Pecca buys 51% stake in Rentas Health for RM100mil from MD's daughter�
Nestcon bags RM25mil road job in Pontian, Johor
Asia’s factories reflect North-South divide as Delta spreads
Financial regulators urgently need to get a grip on 'Big Tech' - BIS
Bursa ends first trading day of August on cautious note
Asian stocks rise on China boost, currencies weaken on virus worries
CPO price to remain high amid output issues
Singapore's Jadestone new upstream investor in Malaysia
Maybank Indonesia posts 1H pre-tax profit of RM223.47m
Oil prices fall on worries over China economy and higher crude output

Stories You'll Enjoy