Sime proposes dividend reinvestment plan

by **Cals** Tue 03 Sep 2013, 14:43

Sime proposes dividend reinvestment plan
Business & Markets 2013
Written by Affin IB Research
Tuesday, 03 September 2013 13:53

SIME DARBY BHD []
(Sept 2, RM9.41)
Maintain add at RM9.39 with a target price of RM10.30: Sime Darby’s fourth quarter ended June 30 of 2013 financial year (4QFY13) net profit increased by 19.2% year-on-year (y-o-y) to RM1.31 billion as higher profit contributions from the property segment and a gain of RM340 million from the disposal of SD Healthcare more than offset lower contributions from the PLANTATION [] (crude palm oil [CPO] production -12.2% and lower CPO average selling price [ASP] of RM2,250 per tonne versus RM3,056 per tonne in 4QFY12) and motor segments.

Quarter-on-quarter (q-o-q), 4QFY13 net profit surged by 89.9% due to higher profit contributions from property (higher profit recognition from Denai Alam, Bandar Bukit Raja, Taman Pasir Putih and Elmina East), industrial (higher sales in all regions, especially Australasia) and motor (strong sales in Malaysia) as well as the disposal gain of RM340 million.

It was partially offset by lower contributions from plantation (CPO production -8.8% but higher CPO ASP versus RM2,147 per tonne in 3QFY13), and energy and utilities (E&U) (allowance for doubtful debts mitigated by higher contribution from China port operations). Excluding the disposal gain and other one-off items, 4QFY13 core net profit amounted to RM932.5 million (-10.7% y-o-y, +33.2% q-o-q).

Full year (12MFY13) net profit declined by 10.8% to RM3.7 billion due to lower profit contribution from plantation (CPO production +3.5% but CPO ASP -20.8% to RM2,317 per tonne versus RM3,056 per tonne in 12MFY12), industrial (lower sales in Australasia, lower deliveries in Malaysia and Singapore, and slowdown in China), E&U (recognition of deferred revenue of RM99.4 million for PD Power in 12MFY12 plus lower profits from China ports and water operations) and others (lower profits from insurance brokerage and Tesco plus gain on disposal of RM29.7 million in 12MFY12), partially compensated by higher profits recorded by property (higher profit recognition from Denai Alam, Bandar Bukit Raja, Taman Pasir Putih and Elmina East) and a gain of RM340 million on completion of the disposal of SD Healthcare.

After tax and excluding foreign exchange and one-off gains/losses, 12MFY13 core net profit declined 18.9% to RM3.34 billion. A higher final net dividend per share (DPS) of 27 sen (12MFY12: 25 sen) has been declared. Total net DPS of 34 sen is above our forecast of 30 sen but slightly lower than the total of 35 sen for 12MFY12.

In order to expand the group’s capital strength and retain cash to fund working capital and capital expenditure requirements as well as to enable shareholders to enlarge their shareholdings at a discount to market price, Sime Darby has proposed a dividend reinvestment plan that provides shareholders an option to reinvest their final cash DPS of 27 sen for new ordinary shares at a 5% discount to the five-day volume weighted average price prior to the price fixing date, after adjusting for the final dividend. — Affin IB Research, Sept 2

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This article first appeared in The Edge Financial Daily, on September 03, 2013.