RHB maintains 'buy' on Sime Darby

RHB Research has retained its 'buy' call on Sime Darby Bhd with a
target price of RM10.60, despite the gloomy outlook for the group's
plantation business.


The prevailing crude palm oil (CPO) prices will have a negative
impact on Sime Darby's earnings, given that the segment made up 50-55
per cent of its earnings. However, this would be partially offset by
its other businesses.


"For the first half of its financial year ending June 30, 2013, the
motor division, comprising 12-15 per cent of the group's earnings,
posted a six per cent year-on-year decline in earnings before interest
and taxes.


"However, this is expected to turn around to a positive 5-10 per
cent growth for the whole 2013 financial year," RHB Research said in a
note today.






The research house said sales volumes in China, for the division, have also improved in the last few months.



The anticipated slowdown in its plantation division will also be
cushioned by stable earnings from its industrial division, comprising
20-25 per cent, as well as its property division, which makes up 6-8
per cent.


"At this juncture, we maintain our earnings forecast for the group.
But, should CPO prices average at RM2,400 per tonne during the group's
financial year ending June 30, 2013, the earnings estimates will be
revised down by 12.3 per cent," RHB Research added.-- Bernama