Sime's bottom-line rebounded

Sime announced its results for 4Q2009 ended 30/6/2009 last week. Its net profit increased sequentially by more than 5 folds to RM984 million on an unchanged turnover of RM7.535 billion. Compared to 4Q2008, net profit dropped by 3.6% while turnover was lower by 17.4%.


Table 1: Sime's 8 quarterly results

We can see Sime enjoyed an all-round improvement, except for its Energy & Utilities division. Most notable improvement are in Plantation & Property divisions.


Table 2: Sime's segmental analysis for last 4 quarter

For a picture of Sime's past 12 quarterly results, see the chart below.


Chart 1: Sime's 12 quarterly results

If we ignore the bottom-line for 2Q2009 & 3Q2009, we can see that Sime's average quarterly EPS is about 15 sen. Based on full-year EPS of 60 sen & today's close of RM8.26, Sime is now trading a PE of 13.8 times. As a largest conglomerate listed on the Malaysian stock market, we can expect Sime to command a PE of at least 15 times. As such, Sime's fair value is about RM9.00.

In the last bull run, Sime's share price rallied in an uptrend, S-S and then, accelerated into S1-S1. Sime may repeat that performance again in the current rally with an uptrend, SS-SS and accelerating into SS1-SS1. The strength of the present rally will not be able to match the 2007-8 rally because of the absence of two important ingredients that drove the eaarlier rally, namely the bubble in CPO and Sime's mega restructuring scheme (that was completed in January 2008). Sime may test its immediate resistance at RM8.50. For the current rally, the ceiling may be at RM10.00-10.80.


Chart 2: Sime's weekly chart as at Aug 28, 2009 (Source: Quickcharts)

Based on the above, a person with exposure to Sime may hold onto the stock. The upside is fairly limited based on fundamental valuation.