Excel – http://1drv.ms/197fbAx
Notes – http://tinyurl.com/o5fhazt
- Absolute EY%:
- FY14 (EPS: 0.512) – Fair value 9.15 (Fair Value Uncertainty: HIGH)
- R4Q (EPS: 0.492) – Fair value 8.79 (Fair Value Uncertainty: HIGH)
- FY15 (EPS: 0.436) – Fair value 7.78 (Fair Value Uncertainty: VERY HIGH)
- FY16 (EPS: 0.516) – Fair value 9.21 (Fair Value Uncertainty: HIGH)
- EPS applied to reach the current stock price (9.34): 0.523
- Absolute EY%:
- The share price driver will be the potential spin off exercise within SIME business divisions which should allow SIME valuation to be rerated higher as it should emerge as pure planter. As it is, it has been reported by media quoting Tan Sri Mohd Bakke Salleh specifying that the listing of its motor unit is set to be executed in 2015 subject to market conditions.
- Weak commodity prices, volatile FX and slow economic growth in Europe and China – SIME earnings outlook in FY15 will be very challenging.
- Besides, the lower profit of RM316m against RM589m in 1HFY14 was largely due to the weak mining sector in Australia.
- The completion of the acquisition of New Britain Palm Oil is still pending
- Another concern is SIME’s ROIC declined from 11.1% to 9.7%, and FY14 ROIC is below WACC too. This is quite worrying.
- Besides, its CROIC was lower than WACC since 2009.
- SIME is losing its competitive advantage (economic moats)
- I think valuation of SIME is not really attractive now. My average price for owning SIME is low, so I will continue to hold SIME.
Latest Financial – Q2 2015 Financial Report (26 Feb 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1885545
At the time of writing, I owned shares of SIME.