KUALA LUMPUR: As Sime Darby Bhd enters the second half of its fiscal year (2HFY24), it is anticipated that it will keep utilising both the consolidation of UMW Holdings Bhd and its industrial business.
In a post-results report, Hong Leong Investment Bank (HLIB) Research stated that the strong orderbook of RM4.2bil will support the expectation of further profitability growth in FY24.
Because of the continued high profitability of coal prices, 66% of its order book is ascribed to the Australian market, primarily the mining sector. Strong demand for maintenance and overhaul services is expected to support profits.
“Demand for construction equipment may see some recovery trend as Malaysia and Singapore starts implementing mega infrastructure projects,” according to the research company.
Sime Darby’s earnings growth, according to HLIB, would be further bolstered after it fully consolidates UMW starting in 3QFY24.
Shortly, UMW will be run as a separate corporate division.
According to HLIB, electric vehicle (EV) contributions would primarily benefit Sime Darby’s motors segment, which is led by the robust Malaysian and Singaporean markets.
It stated that because of the continuous discounting efforts, the China market is still very competitive, which led to declining margins and losses in the second quarter of FY24.
“Sime will continue to leverage onto principal’s new EV models to sustain sales volume, in line with the government’s initiative to promote EV adoption,” added the statement.
Sime Darby announced in its results statement yesterday that the 2QFY24 core profit after tax and minority interests (Patmi) was RM305 million. This improved Patmi from RM682 million in the 1HFY24 by 10.1% year over year.
A three-sen dividend per share, payable on March 7, 2024, was announced by the group.
According to HLIB, the improvement was primarily caused by a larger contribution from its Australian industrial segments following the purchase of Onsite, which led to an increase in the volume of equipment sales and after-sales maintenance operations as well as motor sales.
The research group maintained its “buy” recommendation for Sime Darby at RM2.88, its target price. For FY24–2026, it projects a 5.3% dividend yield to remain.
