Sime Darby Free Essays

Page 1 of 6 Fundamental Analysis for SIME DARBY BHD Company Name: Stock Code (Bursa): Bloomberg: Industry: Sub-Sector: Company Description: Date of Analysis: Financial Year: SIME DARBY BHD Board: Main Board SIME FBMKLCI: TRUE SIME:MK Reuters: SIME. KL TRADING SERVICES OIL PALM/RUBBER AND OTH CROP PRODUCTION PLANTATION; PROP; MOTORS; INDUSTRIAL; ENERGY UTILITIES. 19-Sep-12 2011 30/6/2011 Price: 9. We will write a custom essay sample on Sime Darby or any similar topic only for you Order Now 79 Stock Grade: Emerging Investment Grade Profitability Profitability 10 ROI 8 ROI Liquidity 6 Efficiency 4 Risks 2 0 Potential Growth Buy Hold Returns Potential Growth 65 75 90 50 105 105 Buy Hold Returns 25 Liquidity 1. 80759 40. 02273 62. 4099 36. 10128 85. 8969 57. 48956 18. 75 7. 97 5. 34 6. 93 7. 22 8. 18 5. 48 7. 5 Risks Efficiency Future growth drivers and Risks: http://announcements. bursamalaysia. com/edms/edmswebh. nsf/all/FF95B42CEC4045D948257A7A0062 DF67/$File/Press%20release. pdf Due-Diligence All figures in millions of Ringgit Malaysia except per share values and ratio Measures 2002 @ 2002/6/30 2003 @ 2003/6/30 2004 @ 2004/6/30 2005 @ 2005/6/30 2006 @ 2006/6/30 2007 @ 2007/6/30 2008 @ 2008/6/30 2009 @ 2009/6/30 2010 @ 2010/6/30 2011 @ 2011/6/30 Importane Rate Comments Profitability Increasing Sales Revenue Increasing Net Income After Tax Increasing Gross Profit Margin (Preferably ? 40%) ROI Increasing high ROE (Preferably ? 15%) Increasing ROIC (Preferably ? 15%) Increasing CROIC (Preferably ? 15%) Liquidity Increasing Net Cash from Operations Increasing Free Cash Flow / Sales (Preferably ? 5%) Increasing Quick Ratio (Preferably ? 1) Short declining Cash Conversion Cycle Efficiency Increasing Net Profit Margin (Preferably ? 10%) Increasing OCF/TA (Preferably ? 8%) 12,053 928 29. 9% 13,718 945 30. 4% 14,904 1,015 26. % 18,646 933 24. 4% 20,162 1,203 23. 6% 20,735 1,597 23. 3% 34,045 3,753 26. 2% 31,014 2,341 23. 0% 32,845 855 26. 8% 41,859 3,847 25. 7% 10. 7% 8. 0% 4. 5% 10. 2% 8. 0% 5. 2% 10. 9% 8. 0% 3. 3% 10. 0% 9. 0% 3. 6% 12. 7% 7. 0% 5. 2% 15. 8% 8. 0% 7. 1% 16. 2% 12. 0% 9. 1% 10. 7% 9. 0% -1. 1% 3. 6% 5. 0% 6. 8% 15. 2% 13. 0% 6. 5% 647 3. 5% 1. 09 62 930 4. 3% 1. 41 66 652 2. 6% 1. 39 65 737 2. 3% 1. 12 62 1,154 3. 4% 1. 23 67 1,644 4. 8% 1. 27 65 3,936 7. 2% 1. 38 63 937 -1. 0% 1. 00 91 3,570 5. 9% 1. 00 65 3,393 4. 9% 1. 05 65 10. 0% 5. 2% 9. 0% 6. 3% . 0% 4. 2% 7. 0% 4. 5% 8. 0% 6. 6% 10. 0% 8. 4% 15. 0% 10. 9% 10. 0% 2. 6% 5. 0% 9. 5% 13. 0% 7. 9% Risks Declining Debt/Equity Ratio (Preferably lt; 1) Operating Income Variability Sales Variability Increasing Altman Z Score (Preferably ? 2. 6) Declining Beneish Score (Preferably lt; -2. 22) Potential Growth Increasing Sustainable Growth Rate (Preferably ? 8%) Increasing Expected EBIT Growth N/A (Preferably ? 8%) Quality of Sales Revenue Growth (Preferably ? 80%) N/A 0. 15 1,081 12,053 5. 73 0. 27 1,225 13,718 5. 50 -2. 83 0. 28 1,389 14,904 6. 5 -2. 90 0. 34 1,406 18,646 5. 13 -2. 95 0. 38 1,206 20,162 5. 42 -2. 86 0. 29 1,569 20,735 7. 13 -3. 00 0. 22 4,339 34,045 5. 83 -1. 99 0. 26 3,151 31,014 7. 02 -2. 89 0. 37 2,081 32,845 5. 80 -2. 84 0. 29 5,483 41,859 6. 38 -2. 86 3. 5% 2. 9% 16. 4% 93. 5% 85. 8% 28. 7% 53. 4% 59. 1% 56. 9% 3. 7% 4. 1% 2008: 2002-2011: 2008: 2002-2011: 2008: 2002-2011: 2. 3% 3. 1% 77. 2% 2009: 91. 1% 52. 4% 2009: 58. 2% 76. 6% 2009: 45. 6% 6. 4% 5-Y: 4. 4% 9. 9% 7. 9% 14. 9% 74. 6% 2010: 59. 2% 2010: 14. 9% 2010: 2. 9% 19. 4% 5. 0% -5. 0% 69. 4% 2011: 17. % 2011: 21. 6% 2011: 0. 6% 6. 6% 7. 7% 13. 6% 73. 3% 30. 0% 14. 0% 2007: 2005-2011: Quality of EBIT Growth (Preferably 2007: ? 80%) 2005-2011: Quality of Operating Cash Flow 2007: Growth (Preferably ? 80%) 2005-2011: Buy Hold Returns Shareholder Wealth Creation Full: (Preferably ? 8%) 5. 7% 10-Y: -1. 0% 3-Y: 11. 5% Investment Strategy Position Strategy Position Lump Sum + Top Up Strategy: Buy Criteria Averaging Down Method: Dollar Cost/Value Averaging Criteria 1. The current quarter’s EPS is up more than 15% from the same quarter the year before. . Price is below Intrinsic Value 3. Current EY% or Rolling 4Q EY% ;gt; 6% 4. Current DY% or Rolling 4Q DY% ;gt; 6% 5. Stock price breaks out of consolidation/dip on an uptrend. 6. Comparison of P/B ratio (for Financial stocks only) 7. Company owner, EPF, Khazanah and PNB heavily buying Sell Criteria I Remarks Criteria 1. Current EY% or Rolling 4Q EY% ;lt; 6% for more than 2 years 2. Current DY% or Rolling 4Q DY% ;lt; 6% for more than 2 years 3. Quarterly EPS drop for 5 consecutive months 4. Fundamental of business turns unattractive or bad 5. Found a better opportunity to replace this stock 6. The stock drops near to my average cost or hit my stop loss 7. Long term trend changed from bullish to bearish 8. Company owner, EPF, Khazanah and PNB heavily selling. 9. Did I make a mistake? 10. Has the stock risen too far from its intrinsic value? VI Remarks Discounted Cash Flows Valuation Shares Out. M. O. S. 13 Default Value Custom Value 6009. 46 11 Sustainable Growth % (for Average risk Average Discount % Terminal % 2011 FCF Excess Cash Intangibles Intangibles% Decay Rate Extra Decay Growth (for DCF Calc. premium Risk free Assets add to DCF (Yr4E-Yr7E) (Yr8E-Yr10E) reference) rate 20% 5% 8% 5. 50% 3. 68% 9. 2% 2% 2068. 66 4593. 30 86. 00 0% 8% 15% 4% 11. 50% 15% 20% Projection of Future Free Cash Flow 2012 Yearly Growth Future Value Discounted Perpetuity Value Present Value 2,151. 41 2013 2,237. 46 2014 2,326. 96 18,023. 58 28,024. 79 3-Y Shares Outstanding Fair Value Desired M. O. S. Buy Under Current Price Actual M. O. S. 4. 66 3. 73 9. 79 -110% 5-Y 6009. 46 4. 69 20% 3. 75 9. 79 -109% 2015 2,364. 67 2016 2,445. 07 15,233. 30 28,183. 22 10-Y 4. 70 3. 76 9. 79 -108% 2017 2,528. 1 2018 2,614. 16 2019 2,564. 07 2020 2,633. 81 2021 2,705. 45 9,780. 64 28,239. 49 Market Timing Analysis Discounted Cash Flow Valuation Fair Value Actual M. O. S. Buy Under Selection 3-Y 4. 66 -110% 3. 73 5-Y 4. 69 -109% 3. 75 10-Y 4. 70 -108% 3. 76 ? 3-Y: Fast-growing company; operates in highly competitive, low margin industry 5-Y: Solid company; operates with advantage such as strong marketing channels, recognizable brand name, or regulatory advantage 10-Y: Outstanding growth company; operates with very high barriers to entry, dominant market position or prospects Price-to-book Ratio Valuation by Price-to-book Ratio: Current EY% or Rolling 4Q EY% ;gt; 6% CU EY%: 6. 23 R-4Q EY%: 7. 05 4. 26 60 Current DY% or Rolling 4Q DY% ;gt; 6% CU DY%: 3. 06 R-4Q DY%: 3. 58 Current Cash Return% or MRQ Cash Return% ;gt; 6% 62 CU CR%: 4% Quarterly Financial Performance MRQ CR%: 2% Increasing revenue Increasing net profit Increasing EPS Jun-12’s EPS ? 15% from Jun-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 13,059 11,064 11,389 11,027 14,122 1,313 0. 22 1,074 0. 18 1,101 0. 18 876 0. 15 1,099 0. 18 -16% How to cite Sime Darby, Papers