PETALING JAYA: Sime Darby Bhd is expected to post strong earnings backed by its diverse businesses this year.

       Maybank Investment Bank Research said it expected the group to post strong earnings in the second half of the financial year ending June 30, 2022 (FY22) on the back of the commodity upcycle and local infrastructure capital expenditure.

       “Sime Darby will also continue to benefit from its motor and industrial operations, as it gains strength post pandemic.

       “It is readily embracing the electric vehicle (EV) transition agenda, with a pipeline of EV models. We do not rule out Sime Darby expanding its completely knocked down assembly operations and signing up new franchises to grow its motor ops,” it said in a report yesterday.

       On Wednesday, Sime Darby said that it was planning to introduce four new EV models into the Malaysian market this year.

       Sime Darby is one of the top five largest Caterpillar and BMW dealers globally.

       The group sells, rents, services and supports the Caterpillar range of heavy equipment used in mining and a number of other sectors in China and the Australasia region.

       CGS-CIMB Research said despite the weaker first half of FY22 net profit, Sime Darby’s industrial division earnings are expected to rebound in the second-half, with its healthy order book replenishment thanks to higher coking coal prices, and a pick-up in China’s industrial equipment spending.

       “Sime Darby’s industrial order book rose 49% year-on-year (y-o-y) to RM4bil as at end-December 2021, versus RM2.7bil as at end-December 2020.

       “Meanwhile, the group expects easing auto semi chips shortages in coming quarters to accelerate its inventory replenishment.

       “We learnt that demand for motor vehicles remains strong, underpinned by a healthy order backlog,” it said in a note to clients yesterday,.

       As at end December 2021, Sime Darby’s motor division order book stands at 15,000, which translates into over one month of order backlog.

       AmInvestment Bank has raised its earnings estimate for Sime Darby FY22, FY23, and FY21 by 5.3%, 2.1%, and 4.0%, respectively, to reflect the “better-than-expected” results.

       “The disposal of the 307.6ha of Malaysia Vision Valley land for RM280mil is expected to be completed in the first half of FY23, pending authorities’ approval,” it added.

       On Sime Darby’s first half of FY22 financial performance, Kenanga Research pointed out that the results came in within the consensus expectation, despite all operation segments still in the state of recovery post lockdown.

       “Management noted that most of the group’s operations are in countries that are not subjected to significant movement restrictions and the recovery in motor vehicle sales has generally been strong despite minor setbacks in the global supply chain that could limit sales due insufficient inventories of certain new models.

       “The industrials segment is directly impacted by trade tensions with China on the mining sector in Australia which is likely to be manageable due to the robust coal demand from alternative markets in South Korea, Japan and elsewhere, while the outlook for the construction industry in New Zealand remains positive due to pent-up demand,” Kenanga said.

       In addition, the research house is positive about China’s fiscal stimulus to boost infrastructure investment, which is expected to be rolled out in the near term.