Friday, January 7, 2011

AmResearch maintains Buy on Sime Darby, FV RM10.60

KUALA LUMPUR: AmResearch reiterated its Buy call on SIME DARBY BHD [] with a higher fair value of RM10.60 ashare, pegged to a 10% discount to its sum-of-parts value of RM11.78 a share.

The research house said on Friday, Jan 7 its fair value implies a CY11F PE of 17x - at parity to its three-year average.

Devastating floods in the north-eastern Australian state of Queensland have wreaked havoc on coal and commodity producers with production losses estimated at up to A$2 billion.

Sime's equipment sales to Australia can only be delivered in mid-2011. We have halved FY11F industrial revenue for Australia to RM2.4bil and cut its EBIT margin from 12.5% to 5%.

'But we have also raised our average CPO price assumptions by RM200/tonne to RM3,000/tonne for FY11F and RM3,200/tonne for FY12F-FY13F. The stock currently trades at an attractive CY11F PE of 16x, below its three-year average of 17x,' it said.

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