Friday, January 27, 2017

Sime: Let's Do The Split!

Sime Darby has announced plans to spin off its plantations and property businesses in separate listings on Bursa Malaysia yesterday (here). This is one part of PNB's Strategic Plan 2017-2022 (here) which calls for better domestic public equity performance in order to increase its return to its investors. I have touched on this in my post on UMW two days ago.

In the Star newspaper article, CIMB has raised its target price for Sime to RM9.80. Let's see what the charts say. The weekly chart shows an upside breakout of a rising wedge (ABCD) at RM8.35 on Jan 4. After that, SIme slowly rose up to RMRM8.82 yesterday. With the announcement yesterday of its spin-off plans, Sime share price broke above the psychological RM9.00 mark as well as the horizontal line at RM9.20. The next resistance will come from the line connecting the peaks in 2012-2015 at RM9.50.

Chart 1: Sime's weekly chart as at Jan 27, 2017_10.00 (Source: MalaysiaStock.Biz)

If Sime can break above the RM9.50 mark as well as the RM10.00, it may go into an exponential rise akin to what we saw in 2007 when it merged with a few plantation companies from PNB stable to form Synergy Drive (later renamed Sime again). It would be a perfect irony for a stock to rocket higher twice; once when it became a global plantation giant and again it is no longer that title!

Chart 2: Sime's monthly chart as at Jan 27, 2017_9.45 (Source: MalaysiaStock.Biz)

Based on the potential value from a break-up, Sime is worth investing in provided there is sufficient meat on the bone. If Sime were to pullback to RM9.00 or below, it could be a worthwhile investment. For the more speculative players, you may add your position if Sime were to surpass the RM10.00. Good luck! 

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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