Tuesday, December 2, 2008

Sime, AirAsia Shares Drag KLCI Down

SHARES of Sime Darby Bhd and AirAsia Bhd took a beating and dragged down the overall market yesterday, as concerns over their outlook weighed on market sentiment.

The benchmark Kuala Lumpur Composite Index (KLCI) fell by over two per cent, or 17.71 points, yesterday. Shares of the conglomerate and the discount carrier, among the top 10 active counters, lost more than 10 per cent yesterday.

Sime Darby, which sells palm oil, properties and cars, fell as much as 14.5 per cent or 85 sen to RM5. It closed at RM5.10 yesterday.

The conglomerate, in its first-quarter results briefing on Friday, halved its full-year earnings forecast to RM1.9 billion, from RM3.7 billion initially, due to lower palm oil prices and concerns of an economic slowdown.

This led to several analysts lowering Sime Darby's target price, while some downgraded their recommendations.

"Given the drop in palm oil prices, protracted downturn in property as well as motor distribution segments in subsequent quarters, it is unlikely that Sime's full-year net profit would now match either our and consensus forecasts," said HwangDBS Vickers in a report.

The research house forecast Sime Darby's full-year net profit to hit RM1.98 billion.

AirAsia was not spared either, after the company posted its first quarterly net loss since 2004, due mainly to some one-off provisions.

Its shares fell by 12.2 per cent, or 13.5 sen, to 97.5 sen yesterday, its steepest one-day fall since 2004.

"It's a `sell'. Even as we see AirAsia returning to profitability, we are concerned about its longer-term prospects as its associates continue to bleed and AirAsia reaches saturation point in Malaysia.

"Although there may still be a possibility of privatisation (management said they still have two weeks to sort it out), the offer price can still be revised down. As such, we feel the poor prospects outweigh the privatisation possibility," said OSK Research in a report.

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