KLCI Stock - SIME / 4197 - 2010 Quarter 2

OSK Target Price: 7.02
My Target Price: 7.4+0.22=7.62 (PE 20, EPS 0.37, DPS 0.22)
My decison: NOT BUY (unless price <=7.7)
Reason: Overvalue, low ROE, some division still recorded a loss

My study based on 2010 Quarter 2 report (number in '000):-
- Plantation posted a higher contribution of 14% largely due to profit from the downstream operations and a 16% increase in sales volume of crude palm oil (CPO) which mitigated the effects of the lower average CPO price realised of RM2,222 per tonne compared to RM2,304 per tonne for the previous year
- The higher contribution from Property was largely on account of the RM37.5 million gain recorded following the disposal of a subsidiary and the higher contribution from Bukit Jelutong, Nilai Impian townships and USJ Heights townships
- The effects of the slow down in the mining, marine and oil & gas sectors in Malaysia, Singapore and Australia took a toll on the contribution from Industrial which fell by 15% due to the slower off-take for new equipment and power systems rom New Caledonia and Papua New Guinea operations. China operations, on the other hand, registered some improvement due to equipment sales for infrastructure projects
- Motors posted a 31% higher profit for the current half-year period mainly due to the gain of RM27.7 million from the disposal of a property, better operating results from Singapore, Thailand and New Zealand and dividend income received
- Energy & Utilities recorded a loss due to cost escalation on fabrication and engineering projects as a result of higher off-shore costs and lower revenue in the oil & gas sector
- Healthcare & Others recorded a 233% increase in earnings due to the better overall performance from insurance, bedding and healthcare sectors together with the gain on disposal of an associate amounting to RM3.8 million but decreased by 20% due mainly to the gain of RM3.8 million registered in the preceding quarter following the disposal of an associate
- Corporate expenses was lower due mainly to the inclusion of exchange gains totalling RM14.9 million as compared against the corresponding period’s loss of RM99.7 million but higher compared to the preceding quarter due mainly to the exchange losses of RM2.2 million and RM17.1 million
- Estimate next 4Q eps after 2010 Q2 result announced = 0.37, estimate PE on current price 8.44 = 22.22(DPS 0.22)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.34, estimate highest/lowest PE = 26.44/23.76(DPS 0.2)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.37, estimate highest/lowest PE = 24.43/21.59 (DPS 0.2)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.34, estimate highest/lowest PE = 24.35/18.91 (DPS 0.27)