8 August 2008
NEUTRAL Downgraded
RM7.05 Target: RM8.10
Mkt.Cap: RM42,367m/US$12,904m
Conglomerate
Dry spell..........................oil price of US$120 per barrel.
foreword(序言) is repeated please click here if you want to read
Valuation and recommendation
Forecasts intact but target price cut. We are leaving our earnings forecasts alone but have downgraded our target P/E for the group’s plantation unit from 16x to 12x, mainly to account for our concern over the downside risk to CPO price. This has the effect of lowering our SOP-based target price from RM9.90 to RM8.10. Our new price objective implies a CY09 P/E of 11.5x, which represents a discount to our target market P/E of 13x.
Downgrade to NEUTRAL due to lower upside. In line with our target price downgrade, we have cut our rating for Sime Darby from Outperform to NEUTRAL. The stock now offers a similar return as the KLCI. We expect the share price to be well-supported by its dividend yield of 6-7%, costdown initiatives and M&A potential.
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