Stock Name: SIME
Company Name: SIME DARBY BHD
Research House: OSK
The Teluk Ramunia fabrication yard which Sime Darby Bhd is acquiring from Ramunia Holdings Bhd, will not be a significant contributor to its earnings, OSK Research says.
It said Ramunia's fabrication capacity was estimated at 85,000 tonnes per annum and assuming that its fabrication revenue was able to generate about RM15,000 per tonne, the total revenue contribution expected from this yard at full operational capacity would be about RM1.3 billion.
"Also, if we assume an operating margin of 15 per cent, this would contribute to about RM200 million per annum.
"Having said that, our estimation is only superficial as some higher margin oil and gas products can generate operating margins of 20 to 30 per cent," it said in a research note today.
Sime Darby announced yesterday that all the conditions precedent relating to the sale and purchase agreement for the Teluk Ramunia fabrication yard had beenful filled.
Hence, the sales and purchase agreement is now unconditional and all parties involved will now take the necessary action to complete the acquisition.
OSK said further that its assumption of revenue and operating profit contributions of RM1.3 billion and RM200 million respectively were on the basis of 100 per cent utilisation.
"However, we only expect this yard to achieve utilisation of about 30 per cent in financial year 2011," it said.
The research house said the plantation segment was still the dominant contributor to Sime Darby's earnings, making up 67 per cent of the company's earnings before interest and taxes for the first half of 2010 financial year.
"If we factor in a crude palm oil price of RM2,600 per tonne for the 2010and 2011 calender years, Sime Darby's earnings would be bumped up to RM3.0billion for financial year 2010 and RM3.4 billion for financial year 2011," it added.
OSK rates Sime Darby a "sell" with a target price of RM7.02 a share. -- Bernama
Company Name: SIME DARBY BHD
Research House: OSK
The Teluk Ramunia fabrication yard which Sime Darby Bhd is acquiring from Ramunia Holdings Bhd, will not be a significant contributor to its earnings, OSK Research says.
It said Ramunia's fabrication capacity was estimated at 85,000 tonnes per annum and assuming that its fabrication revenue was able to generate about RM15,000 per tonne, the total revenue contribution expected from this yard at full operational capacity would be about RM1.3 billion.
"Also, if we assume an operating margin of 15 per cent, this would contribute to about RM200 million per annum.
"Having said that, our estimation is only superficial as some higher margin oil and gas products can generate operating margins of 20 to 30 per cent," it said in a research note today.
Sime Darby announced yesterday that all the conditions precedent relating to the sale and purchase agreement for the Teluk Ramunia fabrication yard had beenful filled.
Hence, the sales and purchase agreement is now unconditional and all parties involved will now take the necessary action to complete the acquisition.
OSK said further that its assumption of revenue and operating profit contributions of RM1.3 billion and RM200 million respectively were on the basis of 100 per cent utilisation.
"However, we only expect this yard to achieve utilisation of about 30 per cent in financial year 2011," it said.
The research house said the plantation segment was still the dominant contributor to Sime Darby's earnings, making up 67 per cent of the company's earnings before interest and taxes for the first half of 2010 financial year.
"If we factor in a crude palm oil price of RM2,600 per tonne for the 2010and 2011 calender years, Sime Darby's earnings would be bumped up to RM3.0billion for financial year 2010 and RM3.4 billion for financial year 2011," it added.
OSK rates Sime Darby a "sell" with a target price of RM7.02 a share. -- Bernama
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