Kenanga Research has made a “Outperform” recommendation for Sime Darby Bhd with SoP-derived TP of RM2.40 which implied PER of 14.3x on FY22E EPS. The stock offers a dividend yield of 4.9%.
It said that management noted that most of the group’s operations are in countries/territories that are not subjected to significant movement restrictions and the recovery in motor vehicle sales has generally been strong despite the minor setback in the global supply chain that could limit sales due to insufficient inventories of certain new models.
The stockbroking firm said that the Industrials segment is directly impacted by trade tensions with China on the mining sector in Australia which is likely to be manageable due to the robust coal demand from alternative markets in South Korea, Japan, and elsewhere, while the outlook for the construction industry in New Zealand remains positive due to pent-up demand. “China’s fiscal stimulus to boost infrastructure investment which is expected to be rolled out in the near term to counter,” it said
Kenanga said that Sime Darby’s 1HFY22 CNP of RM581m (-8% YoY) came in within our/consensus expectation at 51%/47% of the full-year estimate. “All operation segment sales are still in the state of recovery post lockdown, with motor vehicles segment continuing recording higher profit growth with sustainable sales of higher-margin models. Currently, sales order backlog is stretched over a one-month period, in line with a gradual recovery in semiconductors chip supply,” the research house said.