Sime's 3Q2009 offers no cheer

Sime has just announced its results for 3Q2009 ended 31/3/2009. Its net profit dropped by 46% q-o-q or 86% y-o-y to RM151 million, while its turnover was 13.5% lower than the previous corresponding quarter (3Q2008) but 2.4% higher than the immediate preceding quarter (2Q2009).


Table 1: Sime's last 8 quarterly results

In term of operating & pre-tax profit, we can see that operating profit has improved from RM395 million in 2Q2009 to RM427 million in 3Q2009 due to a drop in corporate expenses of about RM61 million which has more than offset the RM29 million decline in segmental results. Nevertheless, Sime's pre-tax profit dropped by RM80 million due to share of losses from JVs & associates of RM67 million (as compared to a profit of RM19 million previously).


Table 2: Sime's segmental results analysis for the past 3 quarters

I have presented below the movement of Sime's turnover, pre-tax profit, net profit after tax & net profit attributable to shareholders for the past 11 quarters. We can see that the rate of decline in Sime's profits has reduced. The next quarter will see Sime pulling out of its steep dive, which was brought on by the plunge in CPO prices. The strong rally in CPO prices since April should boost Sime's bottom-line in 4Q2009.


Chart 1: Sime's top-line & bottom-line changes over the past 11 quarters

Chartwise, we can see that Sime's share price may have bottomed out in the period from November last year to March this year. Good entry to this stock is at RM6.50-70.


Chart 2: Sime's weekly chart as at May 25, 2009 (Source: Quickcharts)

Based on the latest results, we have yet to see a recovery in Sime's financial performance since the busting of the bubble in CPO prices. However, this should change for the better in 4Q2009 as CPO prices have gained significantly since April this year.