Sime Darby Group

TABLE OF CONTENTS

1. Executive Summary ................................................... 2

2. Company Overview ..................................................... 3

3. Non-financial Analysis ................................................ 5

3.1 Market and Industry Overview ........................ 6

3.2 Corporate Governance .................................. 6

3.3 Board of Directors ........................................ 6

3.4 Internal Control and Risk Management ................ 6

3.5 Environmental, Safety and Health ..................... 7

3.6 Corporate Social Responsibility ........................ 7

4. Financial Analysis ..................................................... 8

4.1 Profitability Ratios

4.1.1 Net Profit Margin ................. 8

4.1.2 Return on Assets (ROA) ................ 9

4.1.3 Return on Equity (ROE) ................. 13

4.2 Activity/Working Capital Ratios

4.2.1 Average Collection Period Ratio......... 14

4.2.2 Inventory Turnover Ratio................ 15

4.3 Debt/Financial Leverage Ratios

4.3.1 Debt Performance Ratio..................... 16

4.3.2 Interest Cover Ratio......................... 17

4.4 Liquidity Ratios

4.4.1 Current Ratio ............................. 18

4.4.2 Quick (Acid Test) Ratio ................ 19

4.5 Market Related Ratios

4.5.1 Earnings per Share (EPS) ............... 20

4.5.2 Earnings Yield Ratio........................ 21

4.5.3 Price-earning (P/E) Ratio ............... 22

4.5.4 Dividend Yield Ratio..................... 23

4.5.5 Dividend Coverage Ratio................... 24

4.5.6 Dividend Payout Ratio .................. 25

4.6 Segment Analysis

4.6.1 Revenue and EBIT

4.6.2 EBIT Margin

4.6.3 Return of Assets (ROA)

4.6.4 Debt Performance Ratio

5. Conclusions and Recommendations ................................ 26

6. References ..................................................................... 2

7. Appendix

1.0 Executive Summary

Sime Darby Group is one of the largest and oldest conglomerates in Asia-Pacific. An analysis was done to identify the potential of the company in the perspective of an investor. The analysis was divided into two sections which are non-financial and financial aspects of the company.

In the non-financial section, we have included the following:

a. A company overview of Sime Darby which provides details on its diversity of business. In addition, the market overview identifies the political, economic, social and technology factors which are related to its business.

b. Directors' profiles which determine the competency of the Board to manage and to ensure the profitable growth of the company.

c. Corporate Governance, Internal Control and Risk Management to ensure the credibility of its financial reporting and to gauge its sustainability in the fast changing economic environment.

d. Environment & Social Responsibility policy which determines the long term commitment towards the Malaysia's welfare and interest.

In the financial section, Sime Darby's performance was analyzed by the following approach:

a. Key financial ratio such as Profitability, Working Capital, Debt, Liquidity and Market ratios was used on its Annual Reports for 4 years (2002-2005).

b. Sime Darby was benchmark with IOI Corporation due to its similarity on its plantation and property development segments. Moreover, IOI Corporation has been a well performed company in Bursa Malaysia and was rated "Top Plantation Stock" by Mayban Securities Research (The Edge Daily, Mayban Research: IOI Corp top plantation stock)

In the final section, conclusions and recommendations to potential investors was included.

2.0 Company Overview

Sime Darby was founded in 1910 as Sime, Darby & Co Limited involves in plantation sector and has evolved to become a largest conglomerate in Malaysia. It was later incorporated under Sime Darby Berhad in 1979.

Sime Darby's core businesses are organized into five groups: plantations, property, heavy equipment, motor and energy (oil & gas). Besides that, it has other secondary businesses which are in manufacturing, travel and tourism and healthcare. The Group is in the process of rationalizing and streamlining its activities by disposing of non-core assets and strengthening its core businesses.

In addition, Sime Darby has put much focus in its brand management leveraging of its more than 95 years of corporate history. It aims is to create a corporate brand that is based on core values of Sime Darby in diversity and sustainability.

Plantations Group

Its main activities are in plantations management with 80,000 hectares of oil palm plantations and refineries in ASEAN and Middle-East. It was voted the "Best Private Estate" by the Malaysia Palm Oil Board for its Melaka plantation. The company will be investing into 4 new mills with modern technology to further enhance the palm oil extraction efficiency and cost competitiveness.