Affin Hwang maintains hold on Sime Darby

KUALA LUMPUR: Affin Hwang Capital Research maintained its hold call on Sime Darby Bhd with an unchanged target price of RM3.05 as its results came in broadly within its expectations.

The research firm said the industrial segment was the star performer in 6M18 with core profit before interest and tax growing 115% to RM228mil on higher demand from the construction and mining sectors in AUstralia and China. 

The healthcare segment also continued to perform with 6M18 PBIT growing 31% on year to RM25mil on the back of higher revenue from the Malaysian operations. 

However, the Vietnam motor operation reported RM184mil losses in the period.

"We understand that SIME plans to dispose its Vietnam business and BMW inventories following the appointment of a competitor as the new BMW / MINI Importer for the Vietnam market. Excluding its Vietnam operation and gain on disposal, Motor’s 6M18 core PBIT grew by 19% yoy on higher profit from China and Hong Kong operations."

While core pretax profit met 50% of Affin Hwang Research's full-year forecast, Sime Darby's core net profit fell short of expectations due to a higher-than-expected effective tax rate of 30%.

"While we are positive on SIME’s business prospects, its rich valuation of 20.5x FY19E PER has largely priced-in the positives, we believe," said the research firm.