Australia-led industrial strength powers bright outlook for Sime Darby
KUALA LUMPUR: Sime Darby Bhd's growth outlook remains bright, underpinned by resilient performance from the industrial segment, said CIMB Securities Research.
The firms said Australia remains one of Sime Darby's most important growth engines, contributing 53 per cent of Sime's core profit before interest and tax (PBIT) and 33 per cent of its revenue in the financial year 2024 (FY24).
Within the industrial division, it said Australian operations accounted for 77 per cent of Sime Darby Industrial's (SDI) revenue and 87 per cent of its core PBIT in FY24, up from 60 per cent and 67 per cent, respectively, in FY19.
"Sime Darby Industrial (SDI) is emerging as a key growth engine fuelled by strong
performance in Australia, rising mining capex, strategic commodities diversification, and growing contribution from high-margin aftersales and rental services," it said in a note.
According to CIMB Securities, the SDI segment provides annuity-like returns, supported by a growing installed base and multiple machine rebuild cycles.
The firm has conducted a scenario analysis to assess SDI's standalone valuation, offering an alternative basis for sum-of-parts consideration.
"We estimate SDI could be worth RM10 billion to RM12 billion, based on a trailing 2024 price-to-earnings (P/E) of 15 times to 18 times — representing 69–82 per cent of Sime Darby's current market cap of RM14.7 billion.
"In our view, a re-rating is warranted, underpinned by SDI's strong fundamentals, resilient earnings, and attractive margin profile.
"With accelerating digitalisation, expanding aftermarket penetration, and infrastructure-driven tailwinds, SDI presents a compelling industrial pure play with monetisation potential," it said.
With solid PBIT margins and a potential standalone valuation (RM10 to RM12 billion), CIMB Securities sees room for a re-rating for Sime Darby.
The research firm is maintaining its "Buy" call on Sime Darby with an unchanged target price of RM3.00.
"We like Sime for its commendable dividend yields of 7.0 per cent and 7.3 per cent for the calendar year 2025 (CY25) and CY26, respectively," it added.
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