• Maintain BUY with lower TP of RM2.60. Sime Darby’s 1QFY25 core net profit rose +10.6% YoY to RM301mn. this is after stripping out one-off items including RM499mn in disposal gains from Malaysia Vision Valley (MVV) land, Chubb Singapore, and Ferrari operations in Australia. The results were below our and consensus full-year estimates, making up only 18% and 19% respectively. Sime Darby’s revenue grow by (+30% YoY) driven by the contribution from its newly acquired UMW division. We maintain a BUY call with lower target price of RM2.60 (from RM3.00 previously), pegged at 12x PER (based on 3-year mean PER) to FY25F EPS of 22sen.

• Key Highlight. In 1QFY25, Sime Darby reported a 2.8% QoQ decline in revenue to RM18,246mn, driven by weaker sales in the industrial and motor segments. Despite the revenue contraction, net profit surged by +857% QoQ to RM795mn, largely attributed to one-off gains from strategic disposals, including MVV land, Chubb Singapore, and Ferrari operations in Australia. Excluding one-off items, core net profit surged +276% QoQ. The growth was further supported by stronger contributions from the Singapore market, driven by robust EV demand, and improved profitability in Mainland China, underpinned by government incentives.

• Earnings Revision. We revised down our earnings forecast for FY25F/26F by 13%/12% respectively, and introduced our earnings forecast for FY27.

• Outlook. Sime Darby’s outlook remains positive, driven by strong performance across key segments. The industrial segment benefits from resilient commodity demand, sustained mining fleet utilization, and a new RM798mn mining truck contract was secured in Australia in Oct 2024. The motor segment is supported by growth in Mainland China, driven by government backing for new energy vehicles and exports, while Singapore’s EV market remains strong, with BYD leading. Despite competition in China, the segment also gains from strong demand in Malaysia, with TIV forecasted to exceed 800k units in 2024. The UMW segment is on track to meet its full-year sales targets, with 72k units sold out of 95k for Toyota (75% of target) and 260k units sold out of 330k for Perodua (78% of target).

Source: BIMB Securities Research - 29 Nov 2024