Saturday, May 15, 2010

Will Sime Darby be a party spoiler?

Sime Darby confronted with massive selling on last Friday on news of massive costs over run in its energy and utilities division. 40 million shares changed hands on that day. Volume wise, it stick out like a sore thumb. Based on 14% or 840 million of shares held by foreigners, it will take while for the dust to settle down. Don't catch a falling knife that will cut through hands and fingers.

CIMB research did a good job tracking their history of write-offs.

Only one conclusion. You can see how screw up these guys at Sime Darby, they f**ked-up big time in ways you can never imagined, almost every division will give you some surprises. Market hates surprises! From the history, you can see how lacking are their risk management, execution and operations management. Every time you hear a board or a management team needs to bring in outsider, you know that the board/management team had no idea of what is going on. Clueless. Absolutely clueless. It's reminds me of Dibert's management.

Letting their CEO go will make us feel better, sins had been atoned. But it is enough? I sometimes really not sure whether to laugh or cry. We assembled some kind of big conglomerate so that we have some big entity in our bursa to attract foreign investors. Can the logic hold? What's the point of having a 800 pounds gorilla that destroys the whole habitat? What don't they just break up the company to unlock the value?

I am not going to argue how the analyst derived the value of Sime Darby. Let's take it as it is so that we can concentrate on the point of breaking up the company. We all can see that just the plantation unit alone will create of 43 billion market capitalization, is this not big enough? Their industrial unit responsible mostly for selling heavy equipment like Caterpillar which gets a lot of tail wind from infrastructure, mining and logging activities, worth 10 billion and not to mention their property division also worth close to 10 billion as well. Unless, they know that they are vulnerable, almost certain that one of their divisions will screw things up, therefore need other units to cover their asses???! Because of this, the analyst wipes out 12 billion market value from the valuation. I don't blame the analyst but Sime Darby is to be blamed!

Still referring to history that compiled by CIMB. Sime Darby has been having high profile Board of Directors like Musa Hitam, Andrew Sheng, Tajuddin Ali, Ahmad Sarji and etc. They have been appointed since September 2007. Bad things continue to happen during their watch since 2007, what does it tell us?

The more important question, will Sime Darby trigger the sell down across the board? If this stock retrace to RM 6 level, it will bring KLCI to 1300 points level. So will Sime Darby be a party spoiler? Watch the tape.

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