According to Kenanga Research, Sime Darby has now expanded its presence in the mid-market and affordable segments, from its previous predominantly premium offerings.
“This puts it (Sime Darby) in a better position to navigate the impending fuel subsidy rationalisation,” said the research firm in a note to clients.
Kenanga Research, which maintained an “outperform” call on the stock, has raised its target price by 14% to RM2.80 from RM2.45 previously.
It also raised the group’s financial year 2024 (FY24) and FY25 net profit by 2% and 14%, respectively, on earnings enhancement from the acquisition.
“We like Sime Darby for the robust growth in its businesses, post-economic reopening, the strong brands under its stable such as BMW, Caterpillar, Toyota and Perodua as well as its attractive dividend yield of over 5%,” said Kenanga Research.
Upon the conclusion of Sime Darby’s takeover of UMW in February 2024, the group’s presence in the local automotive market will be expanded to the mid-market segment such as Toyota and affordable segment such as Perodua, from the predominantly premium offerings such as BMW.
“Moreover, Sime Darby will likely benefit from the anticipated new launches of Perodua D66B and Toyota Yaris Cross by April,” it added.
Post-acquisition, by virtue of having well known marques namely Toyota and Perodua under UMW, Kenanga Research expects Sime Darby’s market share in the local automotive total industry volume (TIV) will surge to over 50% from 3% previously.
It added that UMW provides access to the massive Toyota ecosystem, a strong high-value supply chain and will enhance Sime Darby’s local market exposure.
Geographically, Sime Darby will have equal exposure to Malaysia, China and Australia, with the remaining 10% in other markets versus being predominantly in China previously.