The RM964mil provisioning that will take place, is made up of losses of RM200mil from the Qatar Petroleum project, RM159mil from the Maersk Oil Qatar project, RM155mil from a project to construct vessels for use in the latter project and RM450mil from cost overruns in the Bakun project.
Looking at the daily chart below, we can see that a medium-term downtrend has formed over the past 6 months. This morning, the share price broke below 2 horizontal support levels at RM8.50 & RM8.30. After making a low of RM8.08, the stock rebounded to a high of RM8.41 at 9.52am. With the 50-day SMA line crossing below the 100-day & 200-day MA line, Sime is likely to drift lower. I would rate Sime a SELL INTO STRENGTH at the present price of RM8.35.
Chart: Sime's daily chart as at May 13, 2010 (Source: Tradesignum)
The current losses in Sime's energy division brings to mind the RM120mil losses in futures trading in its subsidiary, Golden Jomalina in FY2008 (here). The question that must be addressed is whether Sime Darby is too big to be well-managed.
12 comments:
Good day Alex,
Mixed signals. Good for corporate governance; bad for if there are other GLCs in the same category??
Would you mind providing an insights for this sleeping giant MUIIND? In your opinion, would they allow to be back into the banking scene again?
Dear Alex,
May I know what is the fair value , support level for SIME?
I think gov will not allow sime to fail. Any price below RM8 deem a good price to support by government - part of GLC.
Hi Solomon,
MUIInd (closed at RM0.18 yesterday) looks interesting. The reported decent pre-tax profit for its last 2 quarters- RM14.8 million for QE30/9/2009 & RM12.8 million for QE31/12/2009. Assuming it can maintain the same level of profitability, its full-year pre-tax profit would be about RM55.2 million. Net profit would be about RM41.4 million (based on effective tax rate of 25%). EPS would be about 2 sen. So, it is trading at PER of 9 times. While it may appear fully valued, the stock has the advantage of a low base & from that, it may spring a pleasant surprise.
Chartwise, its "uptrend line" should provide support at RM0.15-16.
So, if you are a patient man, you can try this stock. I don't know about this group getting into the banking sector. The problem with MUI group is the lack of drive. It seems to be adrift in a world abound with opportunity.
Hi Ivan,
You are right about Sime getting support from local funds. However, the share would at best be trading sideway if the foreign funds decide to exit. They are holding sizable position in a stock which was once deemed a strategic holding as it was billed as the largest oil palm plantation company in the world. Now, it just looks like one big headache.
Hi Alex,
With KKB Engineering having cleared the RM7.00 level this morning, what would be the next resistance level?
Thx in advance.
hi alex. please comment TM technically. Look damn buliish, can buy TM-CI which traded discount?
Hi Alex,
TQ for your reply.
FYI, foreign funds only hold less than 15% stake in SIME.
(sources: the star)
Hi wong,
TM is testing its all-time high at RM3.55-56. Technically, a break above the all-time high is a bullish signal.
TM-CI is trading at a discount of 7%. If we adjust for the proposed dividend of 13% [less tax], TM-CI is still trading at a discount of 3.5%. This strange phenomenon is also observed in Axiata-CC, which is trading at a discount of 3.7%.
A stock trading at its all-time high while Call Warrants of the stock trades at a discount is not a good sign. This type of market failure is normally a precursor to a top or at least a temporary top.
Hi Ivan,
True. A 15%-stake in Sime is not huge, though one can't say it's small, either. You may recall that the constituent companies that were merged to form Sime Darby were heavily owned by government-owned institutions. So a 15%-stake in the enlarged Sime could be the result of subsequent buying by foreign funds. They could have bought into the hype surrounding the merger in 2008 which promised greater synergy from the amalgamation of so many plantation companies under one roof. The vehicle to undertake the merger was even called Synergy Drive (in short, SD). SD could also stand for Significant Drag. What we need now is for a merchant bank to sell them the idea of a Simple Divestment.
Dear Alex,
Thanks for sharing.
you are really a knowledgable man :D
Just 1 cen of my view, I think the mkt issuer are damn smart. They make easy manipulate the CW and keep force it at discount.
By part in 2 way -buy and sell, they lock the price, and make money as well. Smart?
Dear Alex,
Generally, Sime problem is simply resulting from a poor management team. Not many GLC-companies are professionally managed and operated.
The resignation of its CEO is commendable, but is there really anyone monitoring the GLC COMPANIES ??
Yes, I also think that below RM8.00 may trigger a short term sell off by Foreign Funds ,Pushing it below the last year July price which is approx. 20% of the present to a low RM6.80.
THANKS FOR YOUR COMMENTS
It was a bad, bad idea merging Sime Darby ala' Synergy Drive. The biggest winners were the investment banks.
These same investment banks may perhaps propose a demerger exercise on the premise Sime Darby is too large !!
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