SIME: Headline Earnings Soar on Asset Disposal, Core Profit Dips Amid Market Headwinds

Investment bank PublicInvest Research reported a significant surge in headline net profit for the fourth quarter of fiscal year 2025, primarily driven by a substantial land disposal gain. However, the group’s core net profit experienced a decline amid challenging operational environments.

The company recorded a 4QFY25 headline net profit of RM763.0 million, an increase of over ninefold year-on-year. This impressive figure was largely attributed to a RM443.0 million gain from the sale of its Malaysia Vision Valley (MVV) land. Excluding these one-off items, the group’s FY25 core net profit stood at RM1.16 billion, representing a 9.0% year-on-year decrease.

The results were broadly in line with both PublicInvest’s and market consensus estimates, fulfilling 96.3% and 94.9% of full-year forecasts, respectively. Despite the overall core profit dip, PublicInvest Research is maintaining its Neutral rating on the stock with a sum-of-parts (SOP) based target price of RM2.05.

Performance Overview

Revenue for 4QFY25 saw a 5.5% year-on-year decline to RM17.8 billion, primarily due to softer contributions from the Industrial and Motors divisions. The Industrial division’s revenue fell 10.6%, impacted by lower new equipment sales and a weaker Australian dollar. Similarly, the Motors division experienced a 6.1% revenue decline, grappling with persistently challenging operating conditions across most markets, with Singapore being a notable exception. This decline was partially mitigated by stronger performance from UMW, which saw its revenue rise 2.6% year-on-year, propelled by resilient auto sales and a turnaround in its manufacturing and engineering operations.

The 4QFY25 core net profit decline of 11.2% year-on-year to RM334.0 million was mainly attributed to a weaker performance in the Motor division, which registered a core loss before interest of RM10.0 million, a stark contrast to a PBIT of RM238.0 million in the prior year. This setback was partly offset by robust contributions from the UMW and Industrial divisions. UMW’s PBIT surged 63.2% to RM279.0 million, benefiting from improved manufacturing and engineering operations. The Industrial division’s core PBIT also increased by 6.5% to RM425.0 million, driven by higher contributions from Southeast Asian operations. The Australasian unit maintained stable performance, with margins improving in June, a trend expected to persist into FY26.

Future Outlook and Challenges

The outlook for the group remains uncertain amidst challenging business conditions expected to persist across most operating markets, particularly China. However, China’s central government has initiated measures to regulate irrational price competition, which could lead to capacity reduction, fewer discounts, and improved margins. In Malaysia, the auto sector is anticipated to normalise in 2025 following a strong performance in 2024, creating a high base effect. While the mass-market segment is projected to remain resilient, the premium segment may face headwinds due to reduced consumer confidence, increased vehicle costs from fuel subsidy rationalisation, and heightened competition from competitively priced Chinese automakers, which could put further pressure on profitability.