Sime Darby's earnings to stay resilient amid challenges


KUALA LUMPUR: RHB Research said Sime Darby Bhd's FY22 earnings came in better than forecast as both motor and industrial business segments outperformed its expectations.

For the recently concluded financial year, Sime Darby's profit came in at RM1.2bil, which beat RHB's and street's forecasts at 109% and 106% of full-year estimates respectively, on the back of stronger-than-expected margins.

"Even amidst macroeconomic challenges in the recent months, Sime’s motor and industrial segments have fared well, which we expect to continue into the future," said the research firm in a results report.

Moving forward, RHB said it expects the China motor sales to weather through the various lockdowns, as it did in 4QFY22.

In Australasia, the industrial segment should remain resilient despite softening MET coal prices as miners head to the service workshops, where they earn higher margins than from new mining equipment sales.

"We marginally lift FY23F earnings by 1% and introduce FY25F net profit of MYR1.47bil, implying 6% YoY growth. We lift FY23F-FY24F DPS to 12-12.5 sen from 10 sen each," it said.

RHB added there could also be an additional 12 sen dividend in FY23 if Sime Darby distributes half of the Weifang Port disposal proceeds of RM1.62bil as special dividends, bringing total yeild to 10.4%.

Proceeds from the potential healthcare asset disposal could also provide further upside to FY23 dividend and yield, it added.

For FY25, it forecast a dividend per share of 13 sen.

Reiterating its "buy" call on the counter, RHB rolled forward its valuation to FY23 and raised its target price to RM2.75 from RM2.60 previously.

Meanwhile, Hong Leong Investment Bank (HLIB) Research said Sime Darby will continue to leverage the strong momentum of its industrial segment in FY23, driven by mining in Australia and construction in Malaysia, Singapore and Australia.

"Expect earnings to sustain in FY23, underpinned by the record high order book of RM4.4bil.

"Majority of the order book is anchored by Australia mining sector due to the continued highly profitable coal prices, while margins are expected remain strong as management has seen pick-up in the demand for maintenance and overhaul services, while margins normalise on the costing of parts for the year.

"Demand for construction equipment has also picked up in Australia, Malaysia and Singapore, while China market is expected to remain weak in FY23," it said in its review.

It forecast a dividend yield of 7% following completion of the disposal of Weifang Ports.

The broker maintained its "buy" recommendation with a higher target price of RM2.76, from RM2.60 previously.

Article type: free
User access status:
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

Sime Darby , motor , industrial

   

Next In Business News

Tax cuts will boost economy, provide multiplier impact: Tengku Zafrul
Budget 2023: Govt to enhance green tech financing scheme
OGSE players to benefit from RM1bil maritime and logistics fund
MNOs execute share subscription agreements with DNB
Govt extends tax breaks on listing expenses to tech companies on Bursa Malaysia
ASB, ASB 2 investment limit increased to RM300,000
Govt allocates RM92mil towards developing halal industry
EPF's investment income falls 21% to RM27bil in 1H22
Budget 2023: Reactions from the financial sector
SemarakNiaga initiative receives RM45bil to spur business activity

Others Also Read