SIME still projected to report full-year profit

Analysts have reaffirmed their forecasts that Malaysia's oldest conglomerate will earn more than RM1 billion in the financial year just ended 
 
Analysts have reaffirmed their forecasts that Sime Darby Bhd (4197) will earn more than RM1 billion in the financial year just ended despite a news portal's report suggesting that the country's oldest conglomerate would post its worst loss.

"We are still sticking to our projected profit for the 12 months," CIMB Investment Research analyst Ivy Ng told Business Times.

She said Sime Darby was projected to make RM1.5 billion profit in the financial year ended June 30 2010.

Likewise, JPMorgan Chase Bank has forecast RM1.45 billion profit.
"We remain cautious and advise our investors not to do anything until the details are unveiled in August," said a JPMorgan analyst, who did not want to be named.

She added that Sime Darby's management should make a proper announcement on the matter.

Sime Darby, in an e-mail to Business Times, dismissed the online report which said it could face a potential loss of between RM2 billion and RM2.5 billion for the fiscal year just ended.

"Sime Darby would like to clarify that based on its best estimate, it still expects its results for financial year 2010 to be in the black," its head of external communication Othman Abu Bakar said.

The group will announce its financial results at the end of the month, he added.

Up to the first nine months ended March 31 2010, it made a net profit of RM804.202 million versus RM1.29 billion in the previous corresponding period.

Yesterday, Sime Darby shares took a beating, losing 18 sen to close at RM7.52. This wiped out slightly over RM1 billion of its market capitalisation.

It now has a market cap of just above RM45 billion.

The online report attributed the possible losses to Sime Darby's ill-advised investments in the energy and utilities sector in Qatar as well as tardy business practices in the development of the Bakun dam in Sarawak.

A KAF Seagroatt & Campbell Securities Sdn Bhd analyst said that for Sime Darby to suffer that kind of losses, it would have to post a net loss or fully book a provision of RM3.3 billion in the final quarter of the year.

"We are not saying it is impossible, but to generate such a huge loss seems far-fetched," he said.

The group suffered a loss of RM308.6 million after booking a RM964 million provision in its energy and utilities division in the third quarter ended March 31 2010.

The total writedown for the division so far was RM1.3 billion.

RHB Research Sdn Bhd analyst Hoe Lee Leng wrote in a report yesterday that a forensic audit on Sime Darby would be ready on August 24.

It will determine if the group needs to make more provisions.

Hoe added that the board will also review a strategic plan for all its divisions on that day.

Some analysts said that the loss quoted by the news portal could be due to some provisions for losses, future losses or investments which might not be recovered.

They said that there were no fresh details to downgrade their ratings on Sime Darby.



by Lynn Omar