Sime's top-line & bottom-line dropped

Sime has just announced its results for 2Q2009 ended 31/12/2009. From Table 1 below, we can see that net profit dropped by 68% q-o-q or 65% y-o-y to RM278.5 million, while turnover dropped by 16% q-o-q or 10% y-o-y to RM7.3 billion.


Table 1: Sime's 8 quarterly results

The Plantation division is Sime's biggest division, contributing 70% of its segmental results & 40% of its turnover (see Table 2 below). I have raised the question in the previous post on Sime, "How would Sime perform in the next quarter, given that CPO prices are trading at RM1600 per tonne presently? The operating margin of Sime's Plantation division is about 28% (i.e. operating profit of RM968.2 million over turnover of RM3.491 billion for 1Q2009). Since the present CPO prices are 54% lower than Sime's CPO average prices for 1Q2009, this means that Sime could make a loss in its Plantation division for 2Q2009."


Table 2: Sime's last 4 quarters' Segmental Performance

From Table 3, we can see that Sime's Plantation division has managed to stay in the black & to chalk up an operating profit of RM140 million for 2Q2008 due to two reasons, i.e. better average CPO of RM1770 per tonne and higher volume sold (1,454 tonnes sold for 2Q2009 as compared to 1,179 tonnes sold for 1Q2009). With CPO prices staging a recovery, I believe Sime can avoid the stigma of reporting a loss from its Plantation division.


Table 3: Sime's last 4 quarters' Plantation Division's Performance

Technically, Sime share price is still in a medium-term downtrend. A break above the 100-day SMA (currently, at RM6.00) could signal the beginning of the bottoming phase for Sime. A short-term uptrend can be seen, with support at RM5.40.


Chart: Sime's daily chart as at Feb 26, 2009 (source: Quickcharts)

Based on poor performance of its Plantation division, Sime's share price is likely to be trapped at RM5.00-6.00. At these prices, I would consider Sime as fully valued.