"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.