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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.
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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.
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2023-05-21 00:06:28
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