8 Latest Updates You Must Know From Sime Darby Bhd 2017 Annual Report

Established in 1910, Sime Darby Bhd has stood the test of times and has emerged into one of the leading multinational conglomerates in Malaysia with diversified business interests across multiple industries. They include mainly oil palm plantation, property development, automotive distribution, and trading of heavy equipment in 25 different countries worldwide.

In this article, I’ll share 7 things you need to know about Sime Darby Bhd before you invest.

#1: Stock Symbol

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Ticker Symbol: KLSE: SIME / KLSE: 4197
Market Capitalization: RM 60.48 Billion (24 October 2017)

Share Price: RM 9.11 (24 October 2017)

Sector: Diversified

Syariah Compliant: Yes

#2: The Business

Presently, Sime Darby Bhd derives income from 4 main business divisions. They include:

  1. Oil Palm Plantations
    Sime Darby Plantations is one of the largest producers of palm oil in the world. As at 30 June 2017, its upstream division owns 251 estates with 602,732 hectares in total planted area and 72 palm oil mills in Malaysia, Indonesia, Papua New Guinea, the Solomon Islands, and the Liberia.

    Meanwhile, its downstream division owns 12 refineries, 10 kernel crushing plants, 1 soya crushing plant, 3 oleochemical plants and 14 bulking installations spread across 16 countries. In 2017, this division has reported making RM 14.77 billion and RM 1.98 billion in revenues and profits before interest and tax (PBIT) respectively.  
  2. Property Development
    Sime Darby Properties is the largest property developer in Malaysia. It has built a 45-year track record of developing residential, commercial and industrial properties. Also, Sime Darby Bhd is also participating in the Battersea Power Station project in London, England. In 2017, this division has reported making RM 2.19 billion and RM 801 million in revenues and PBIT respectively.
  3. Automotive Distribution
    Sime Darby Motors is one of the leading automotive groups in Asia Pacific. It represents brands such as BMW, Jaguar, Porsche, Ford, Land Rover, and Hyundai and built a presence in Australia, China, Hong Kong, Macau, Malaysia, New Zealand, Singapore, Taiwan, Thailand, and Vietnam. In 2017, Sime Darby Motors has sold 83,974 units of vehicles. This translates into RM 20.60 billion and RM 633 million in revenues and PBIT respectively.
  4. Heavy Equipment
    Sime Darby Industrial derives income from selling and renting both new and used Caterpillar (CAT) equipment and provides after-sales service mainly in Malaysia, Australia, China and Singapore. It is currently the largest Caterpillar dealers in the world. In 2017, Sime Darby Industrial has reported making RM 10.13 billion in revenues. However, it has incurred RM 4 million in Losses before interest and tax (LBIT).
  5. Logistics
    Sime Darby Logistics is the primary operator of Weifeng Port in Shandong, China. Presently, it owns 23 berths capable of loading and discharging containers, dry bulk, break bulk, general and liquid cargo. In 2017, Sime Darby Logistics has reported having RM 303 million and RM 64 million in revenues and PBIT respectively.

#3: The Financials

Over the last 6 years, Sime Darby Bhd has maintained its group revenues at RM 40 – 50 billion a year. The conglomerate has reported a decline in profits mainly from its heavy equipment division. This has caused shareholders’ earnings to drop from RM 4.15 billion in 2012 to RM 2.44 billion in 2017.

Source: Annual Reports of Sime Darby Bhd

#4: Future Outlook

On 25 August 2017, Sime Darby Bhd has announced a proposal to undertake a major restructuring exercise on the entire group structure. It intends to list Sime Darby Properties and Sime Darby Plantations on Bursa Malaysia. Upon completion, Sime Darby Bhd would remain listed on Bursa Malaysia with its automotive distribution and heavy equipment as main business divisions. As I write, the proposal is subjected to approval and is expected to be completed by the end of 2017.

#5: Risks

Sime Darby Bhd has identified several risks which have and will impact its financial results in the future. They include:

  1. Oil Palm Plantations
    Sime Darby Plantations is the main income contributor to Sime Darby Bhd. Thus, the group is subjected to the risks relating to price fluctuation of crude palm oil (CPO), adverse weather conditions, and dependence on physical labour and foreign workers to operate its oil palm plantations.
  2. Property Development
    Presently, there is a slowdown in the property market in Malaysia. It is more pertinent in the high-end property market. Moving forward, Sime Darby is planning to launch Jendela Alya KL, Phase P-H5 Bukit Jelutong, and Elmina Green 1A at Elmina West with combined gross development value (GDV) of RM 922 million in the financial year 2018. This is in addition to its unbilled sales of RM 1.67 billion at 30 June 2017. As such, Sime Darby Properties is expected to ride through the present slowdown of the property market with these projects.
  3. Heavy Equipment
    Sime Darby Industrial is affected by a slowdown in the mining and construction sector in Australia and a slowdown in the offshore oil & gas services sector in Singapore. Profit margins were affected by the competition for heavy equipment sales remains intense.
  4. Automotive Distribution
    Sime Darby Motors is affected by a weak market and challenging trading conditions in Malaysia. The costs of importing vehicles have increased due to the weakening of the Ringgit Malaysia.  

#6: Valuation

As I write, Sime Darby Bhd is trading at RM 9.11. In 2017, Sime Darby Bhd has reported making RM 0.367 in earnings per share (EPS). Thus, its current P/E Ratio works out to be 24.82. As at 30 June 2017, Sime Darby Bhd has reported having RM 5.625 in net assets a share. Thus, its current P/B Ratio works out to be 1.62.

#7: Investors’ Relation

For further enquiries on Sime Darby Bhd’s Investors Relation matters, you may contact:

Benjamin Poh

Designation: Head, Investor Relations

Telephone: (603) 2691 4122

Email: investor.relations@simedarby.com

 #8: Major Shareholders

As at 13 September 2017, the substantial shareholders of Sime Darby Bhd are:

– Amanah Saham Malaysia: 41.03%

– Employees Provident Board Bhd: 11.03%

– Permodalan Nasional Bhd: 6.04%

– Kumpulan Wang Persaraan (Diperbadankan): 5.77%

– Amanah Saham Wawasan 2020: 1.82%

What Do You Think Of  Sime Darby Bhd As An Investment? Will You Invest In It? Share Your Views Below

To Find Out More About How To Invest In Asia, Do Check Out Our Latest Book; Value Investing In Asia.

The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Ian’s personal capacity. It does not in any way represent those of his employer and other related entities. Ian does not own any companies mentioned.

Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

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