WITH its share price being in a subdued state, the revelation of a par excellence 1H FY2021 financial performance would at least being some cheers to investors of Sime Darby Plantation Bhd (SDPL).
Against a backdrop of the planter’s normalised earnings during the period at RM1.047 bil, which exceeded 100% year-on-year (yoy), MIDF Research has revised upward Sime Plantation’s target price to RM6.10 (from RM5.77 previously) while reiterating its “buy” call.
The RM6.10 price tag is 58% higher than the planter’s closing price of RM3.85 yesterday (Aug 18). Recall that from a 52-week high of RM5.25, Sime Plantation’s share price has dipped to a low of RM3.27 ON Aug 2.
“All-in-all, SDPL’s 1H FY2021 normalised earnings came in above ours and consensus expectations, accounting for 74.9% and 64.0% of full year FY2021 earnings estimates respectively,” noted the research house in a results review.
“We are revising our earnings forecast for FY2021 and FY2022 by +46.3% and +5.7% to RM2 bil and RM1.17 bil respectively (from RM1.4 bil in FY2021 and RM1.1 bil in FY2022) given better financial performance from its upstream segment.”
In view of its performance, Sime Plantation declared an interim dividend of 7.9 sen (ex-date: Oct 27).
With regard to the thorny issue of the Withhold Release Order (WRO) by the US Customs and Border Protection (CBP) against Sime Plantation – a contributing factor to the company’s depressed share price – MIDF Research said the nationwide lockdown has led to a slow progress of an assessment report.
“Nonetheless, we believe that the group’s outlook will remain resilient as it is planning to implement the necessary improvements and specific action plan upon the completion of the assessment report in early 2022,” added the research house.
Meanwhile, Maybank IB Research said although Sime Plantation’s 1H 2021 core earnings beat its/consensus expectations, the performance is probably a one-off affair.
“We think Sime Plantation’s 2H 2021 will be lower half-on-half as total FV (fair value) gains of RM154 mil in 1H 2021 is unlikely to repeat in 2H 2021 while CPO (crude palm oil) prices may possibly weaken somewhat in 4Q 2021,” projected analyst Ong Chee Ting.
“Following our earnings upgrade, we raise our RNAV (revised net asset value) target price to RM4.07 (previously RM3.76) but maintain our “hold” call. We prefer Kuala Lumpur Kepong Bhd (“buy”; current price: RM19.88; target price: RM29.90) for large caps.”
At 9.38am, Sime Plantation was up 5 sen or 1.3% to RM3.90 with 430,700 shares traded, thus valuing the company at RM26.97 bil. – Aug 19, 2021
