‘Pure play’ strategy set to lift Sime Darby shares

Analysts expect group to provide decent dividend yield and value creation via demerger exercise

SIME Darby Bhd’s shares are set for a boost before the completion of its “pure play” strategy that is tentatively slated for the end of this month with the listing of Sime Darby Plantation Bhd and Sime Darby Property Bhd.

An analyst changed Sime Darby’s target price higher while the rest maintained their relatively high target prices for the conglomerate.

MIDF Research said it expected Sime Darby to provide decent dividend yield and value creation via its demerger exercise to support its share price.

“This is despite Sime Darby’s relatively high price earnings ratio at 24.8 times,” it added.

The research house has a target price of RM9.25 for Sime Darby.

MIDF Research said there would be an extraordinary general meeting (EGM) on Monday after which the reference price for Sime Darby Plantation, Sime Darby Property and the future Sime Darby will be announced.

Sime Darby was targeting end of this month for the listing and issuance of prospectus, according to MIDF Research.

Kenanga Research, meanwhile, said Sime Darby’s strong results in the first quarter of next financial year might provide a shortterm buzz to investors looking to enter before the listing date.

“For their upcoming listing of the plantation and property segments, the company also provided estimated reference prices for plantation at RM5.43 to RM6.26 per share and for Property at RM1.45 to RM1.75 per share while Sime Darby’s share price would be automatically adjusted to RM1.18 to RM2.21 per share,” it said.

The firm upgraded Sime Darby’s target price to RM9.65 from RM9.40 previously.

Kenanga Research said the group’s sterling core profit of RM875 million in the first quarter, which rose eight per cent quarter-on-quarter, had exceeded expectations.

The firm raised its financial years 2018 and 2019 earning forecasts by 15 per cent and seven per cent, respectively.

Public Investment said Sime Darby’s new key performance index will only be released upon the completion of its demerger exercise.

“Pending the demerger exercise involving the plantation and property arms, which are expected to take place by endNovember, we maintain our “outperform” call on Sime with an unchanged target price of RM9.72,” it said.

Sime Darby closed 0.33 per cent or three sen lower at RM8.97 yesterday.

Group’s sterling core profit of RM875 million in the first quarter, which rose eight per cent quarter-on-quarter, has exceeded expectations.

KENANGA RESEARCH