Sime Darby

Page 1 of 6 Fundamental Analysis for SIME DARBY BHD Company Name: Stock Code (Bursa): Bloomberg: Industry: Sub-Sector: Company Description: Date of Analysis: Financial Year: SIME DARBY BHD Board: Main Board SIME FBMKLCI: TRUE SIME:MK Reuters: SIME. KL TRADING SERVICES OIL PALM/RUBBER AND OTH CROP PRODUCTION PLANTATION; PROP; MOTORS; INDUSTRIAL; ENERGY & UTILITIES. 19-Sep-12 2011 30/6/2011 Price: 9. 79 Stock Grade: Emerging Investment Grade Profitability Profitability 10 ROI 8 ROI Liquidity 6 Efficiency 4 Risks 2 0 Potential Growth Buy & Hold Returns Potential Growth 65 75 90 50 105 105 Buy & Hold Returns 25 Liquidity 1. 80759 40. 02273 62. 4099 36. 10128 85. 8969 57. 48956 18. 75 7. 97 5. 34 6. 93 7. 22 8. 18 5. 48 7. 5 Risks Efficiency Future growth drivers and Risks: http://announcements. bursamalaysia. com/edms/edmswebh. nsf/all/FF95B42CEC4045D948257A7A0062 DF67/$File/Press%20release. pdf Due-Diligence All figures in millions of Ringgit Malaysia except per share values and ratio M easures 2002 @ 2002/6/30 2003 @ 2003/6/30 2004 @ 2004/6/30 2005 @ 2005/6/30 2006 @ 2006/6/30 2007 @ 2007/6/30 2008 @ 2008/6/30 2009 @ 2009/6/30 2010 @ 2010/6/30 2011 @ 2011/6/30 Importane Rate CommentsProfitability Increasing Sales Revenue Increasing Net Income After Tax Increasing Gross Profit Margin (Preferably ? 40%) ROI Increasing high ROE (Preferably ? 15%) Increasing ROIC (Preferably ? 15%) Increasing CROIC (Preferably ? 15%) Liquidity Increasing Net Cash from Operations Increasing Free Cash Flow / Sales (Preferably ? 5%) Increasing Quick Ratio (Preferably ? 1) Short & declining Cash Conversion Cycle Efficiency Increasing Net Profit Margin (Preferably ? 10%) Increasing OCF/TA (Preferably ? 8%) 12,053 928 29. 9% 13,718 945 30. 4% 14,904 1,015 26. % 18,646 933 24. 4% 20,162 1,203 23. 6% 20,735 1,597 23. 3% 34,045 3,753 26. 2% 31,014 2,341 23. 0% 32,845 855 26. 8% 41,859 3,847 25. 7% 10. 7% 8. 0% 4. 5% 10. 2% 8. 0% 5. 2% 10. 9% 8. 0% 3. 3% 10. 0% 9. 0% 3. 6% 12. 7% 7. 0% 5. 2% 15 . 8% 8. 0% 7. 1% 16. 2% 12. 0% 9. 1% 10. 7% 9. 0% -1. 1% 3. 6% 5. 0% 6. 8% 15. 2% 13. 0% 6. 5% 647 3. 5% 1. 09 62 930 4. 3% 1. 41 66 652 2. 6% 1. 39 65 737 2. 3% 1. 12 62 1,154 3. 4% 1. 23 67 1,644 4. 8% 1. 27 65 3,936 7. 2% 1. 38 63 937 -1. 0% 1. 00 91 3,570 5. 9% 1. 00 65 3,393 4. 9% 1. 05 65 10. 0% 5. 2% 9. 0% 6. 3% . 0% 4. 2% 7. 0% 4. 5% 8. 0% 6. 6% 10. 0% 8. 4% 15. 0% 10. 9% 10. 0% 2. 6% 5. 0% 9. 5% 13. 0% 7. 9% Risks Declining Debt/Equity Ratio (Preferably <1) Operating Income Variability Sales Variability Increasing Altman Z Score (Preferably ? 2. 6) Declining Beneish Score (Preferably < -2. 22) Potential Growth Increasing Sustainable Growth Rate (Preferably ? 8%) Increasing Expected EBIT Growth N/A (Preferably ? 8%) Quality of Sales Revenue Growth (Preferably ? 80%) N/A 0. 15 1,081 12,053 5. 73 0. 27 1,225 13,718 5. 50 -2. 83 0. 28 1,389 14,904 6. 5 -2. 90 0. 34 1,406 18,646 5. 13 -2. 95 0. 38 1,206 20,162 5. 42 -2. 86 0. 29 1,569 20,735 7. 13 -3. 00 0. 22 4,339 34,045 5. 83 -1. 99 0. 26 3,151 31,014 7. 02 -2. 89 0. 37 2,081 32,845 5. 80 -2. 84 0. 29 5,483 41,859 6. 38 -2. 86 3. 5% 2. 9% 16. 4% 93. 5% 85. 8% 28. 7% 53. 4% 59. 1% 56. 9% 3. 7% 4. 1% 2008: 2002-2011: 2008: 2002-2011: 2008: 2002-2011: 2. 3% 3. 1% 77. 2% 2009: 91. 1% 52. 4% 2009: 58. 2% 76. 6% 2009: 45. 6% 6. 4% 5-Y: 4. 4% 9. 9% 7. 9% 14. 9% 74. 6% 2010: 59. 2% 2010: 14. 9% 2010: 2. 9% 19. 4% 5. 0% -5. 0% 69. 4% 2011: 17. % 2011: 21. 6% 2011: 0. 6% 6. 6% 7. 7% 13. 6% 73. 3% 30. 0% 14. 0% 2007: 2005-2011: Quality of EBIT Growth (Preferably 2007: ? 80%) 2005-2011: Quality of Operating Cash Flow 2007: Growth (Preferably ? 80%) 2005-2011: Buy & Hold Returns Shareholder Wealth Creation Full: (Preferably ? 8%) 5. 7% 10-Y: -1. 0% 3-Y: 11. 5% Investment Strategy Position Strategy Position Lump Sum + Top Up Strategy: Buy Criteria Averaging Down Method: Dollar Cost/Value Averaging Criteria 1. The current quarter's EPS is up more than 15% from the same quarter the year before. . Price is below I ntrinsic Value 3. Current EY% or Rolling 4Q EY% ;gt; 6% 4. Current DY% or Rolling 4Q DY% ;gt; 6% 5. Stock price breaks out of consolidation/dip on an uptrend. 6. Comparison of P/B ratio (for Financial stocks only) 7. Company owner, EPF, Khazanah and PNB heavily buying Sell Criteria I Remarks Criteria 1. Current EY% or Rolling 4Q EY% ;lt; 6% for more than 2 years 2. Current DY% or Rolling 4Q DY% ;lt; 6% for more than 2 years 3. Quarterly EPS drop for 5 consecutive months 4. Fundamental of business turns unattractive or bad 5.Found a better opportunity to replace this stock 6. The stock drops near to my average cost or hit my stop loss 7. Long term trend changed from bullish to bearish 8. Company owner, EPF, Khazanah and PNB heavily selling. 9. Did I make a mistake? 10. Has the stock risen too far from its intrinsic value? VI Remarks Discounted Cash Flows Valuation Shares Out. M. O. S. 13 Default Value Custom Value 6009. 46 11 Sustainable Growth % (for Average risk Average Discount % Terminal % 2011 FCF Excess Cash Intangibles Intangibles% Decay Rate Extra Decay Growth (for DCF Calc. premium Risk free Assets add to DCF (Yr4E-Yr7E) (Yr8E-Yr10E) reference) rate 20% 5% 8% 5. 50% 3. 68% 9. 2% 2% 2068. 66 4593. 30 86. 00 0% 8% 15% 4% 11. 50% 15% 20% Projection of Future Free Cash Flow 2012 Yearly Growth Future Value Discounted Perpetuity Value Present Value 2,151. 41 2013 2,237. 46 2014 2,326. 96 18,023. 58 28,024. 79 3-Y Shares Outstanding Fair Value Desired M. O. S. Buy Under Current Price Actual M. O. S. 4. 66 3. 73 9. 79 -110% 5-Y 6009. 46 4. 69 20% 3. 75 9. 79 -109% 2015 2,364. 67 2016 2,445. 07 15,233. 30 28,183. 22 10-Y 4. 70 3. 76 9. 79 -108% 2017 2,528. 1 2018 2,614. 16 2019 2,564. 07 2020 2,633. 81 2021 2,705. 45 9,780. 64 28,239. 49 Market Timing Analysis Discounted Cash Flow Valuation Fair Value Actual M. O. S. Buy Under Selection 3-Y 4. 66 -110% 3. 73 5-Y 4. 69 -109% 3. 75 10-Y 4. 70 -108% 3. 76 ? 3-Y: Fast-growing company; operates in highly competitive , low margin industry 5-Y: Solid company; operates with advantage such as strong marketing channels, recognizable brand name, or regulatory advantage 10-Y: Outstanding growth company; operates with very high barriers to entry, dominant market position or prospectsPrice-to-book Ratio Valuation by Price-to-book Ratio: Current EY% or Rolling 4Q EY% ;gt; 6% CU EY%: 6. 23 R-4Q EY%: 7. 05 4. 26 60 Current DY% or Rolling 4Q DY% ;gt; 6% CU DY%: 3. 06 R-4Q DY%: 3. 58 Current Cash Return% or MRQ Cash Return% ;gt; 6% 62 CU CR%: 4% Quarterly Financial Performance MRQ CR%: 2% Increasing revenue Increasing net profit Increasing EPS Jun-12's EPS ? 15% from Jun-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 13,059 11,064 11,389 11,027 14,122 1,313 0. 22 1,074 0. 18 1,101 0. 18 876 0. 15 1,099 0. 18 -16% Sime Darby COMPANY BACKGROUND Sime Darby Berhad is a multinational company which was established in 1910; a British businessman William Sime and Henry Darby established Sime, Darby & Co. and is based in Malaysia. Sime Darby is also involved in key growth sector of the national economy, plantations, property, motors, energy & utilities and healthcare. Business activities include oil palm and the company's original business, the manufacture of rubber tires, heavy equipment and motor vehicle distribution, property development, power generation, and engineering services.Other operations include the manufacture of paints, cooling tourism product manufacturing, and tourism services, hospitals, and golf courses. Sime Darby is listed on Bursa Malaysia Securities Berhad on the main board. The company is the largest in Southeast Asia and the largest multinational companies in Malaysia. They operate in more than 20 countries and have around 100,000 employees worldwide. William Middleton Sime, a traveler f rom Scotland. In his efforts to be successful, he has to face two times a failure in the import-export business and other coffee farm when he left his job as a mercantile assistant in Singapore.Henry Darby was a wealthy 50-year-old English banker who owned property in Northern Malaya. The organization is well known in the field of global business and is also experienced in the field of business. They have a wide range of industries such as Kumpulan Guthrie Berhad and Golden Hope Plantations Berhad for combined and created as a new organization with the mission and vision and new goals. VISION To be a leading multinational corporation delivering sustainable value to all stakeholders. MISSION 1. We are committed to developing a winning portfolio of sustainable businesses; 2.We subscribe to good corporate governance and high ethical values; 3. We continuously strive to deliver superior financial returns through operational excellence and high performance standards; and 4. We provide an environment for our people to realize their full potential. CORE AND RELATED BUSINESS Sime Darby is a key player in the Malaysian economy as well as a diversified multinational involved in key growth sectors, namely, plantations, property, motors, industrial equipment, energy ; utilities and healthcare with operations in more than 20 countries. . Sime Darby Plantation Sime Darby Plantation is the largest oil palm plantation in the world to produce about 2. 4 million tons or 6% of the production of crude palm oil (CPO) is the world every year, making the Sime Darby Plantation as sustainable producers of edible oils in the world. Sime Darby has two operations, namely: I. Upstream operations Sime Darby Plantation has an area of 682. 616 hectares in Malaysia and Indonesia, with the rest of the oil palm planted area of 519. 620 hectares. It has a total of 200 fields and 64 oil mills in the two countries.Outside Asia, starting from January 2010 has expanded its upstream operations to Lib eria in Africa. Overall, Sime Darby Plantation has 200,000 hectares in Liberia, where 1. 190 hectares have been planted with oil palm until 31 January 2012. As a key player in keeping the industry, Sime Darby plantation division using best practices. 329. 225 of this part have been planting trees for rare and endangered in the next three years, as part of its commitment towards ensuring a more reserved nature. Trees are grown mainly in the area of the holding company, while partially buried along with other companies.II. Downstream Operations Sime Darby Plantation downstream operations operate in 15 countries, covering the production and distribution of oil and fat products for biodiesels, oleochemicals, and nutraceuticals. It is divided into two segments namely based food and non-food segments carried by eight refineries located in : * Malaysia (Sime Darby Jomalina Sdn Bhd, Sime Darby Kempas Sdn Bhd and Sime Darby Austral Co. , Ltd. ) * Singapore (Sime Darby Edible Products Limited ) * Thailand (Morakot Industries Public Company Ltd) Vietnam (Golden Hope – Nha Be Oils Sdn Bhd) * Netherlands (Sime Darby Unimills B. V. ) * South Africa (Sime Darby Hudson ; Knight (M) Sdn Bhd) III. Food Sime Darby Plantation also produces and markets a variety of consumer goods such as cooking oil, fruit juice and cooks the sauce for the Malaysian market. Sime Darby Jomalina which is a subsidiary of Sime Darby Berhad produce refined palm oil and palm kernel oil products which include shortening, industrial margarine, frying palm oil, milk fat replacement, vegetable ghee and cooking oil.Also produce oil for frying, application in dairy products, dyes and as a food for the domestic market and for export to Japan, Hong Kong, Europe and the United States. Sime Darby also niche product the following: * Special Animal Fat Substitute (Safar) – A substitute vegetable fats for animal fats in food products, * Jomalina Quality Assurance (JGQ) products – products made fr om palm oil with a low content of saturated fatty acids, * Golden Joma Red Olein – Red Palm Oil with beta carotene content is very high. IV. Research ; DevelopmentSime Darby Plantation is a leader in the research ; development of oil palm, and was the first company in the world to successfully compile, assemble and annotate the oil palm genome. Breakthroughs will allow scientists and our research staff to identify markers for the valuable features such as features yield, disease resistance and drought tolerance, and use these markers to breed a new generation of oil palm. The Division now has more than 200 scientists and researchers, who conducted various studies on the efficacy results, best practices, quality, best agricultural practices and food ingredients.Division also has a fully operational along the palm oil value chain – from farm to food on the table, He took himself one of the cheapest foods in the form of oil-estate estate, processing of this material in it s own farm and later in its own filter factories, and finally, it is also processed cooking oil for domestic market. As a fully integrated player, this means that it can control the quality at every stage by using best practices in all layers of palm oil value chain.This process is done by thinking of the environment and quality, ensuring that while providing a valuable material for the needs of the world, our earth is also protected through best practices. 2. Sime Darby Property Sime Darby Plantation is a leader in research ; development of oil palm, and was the first company in the world to successfully compile, assemble and annotate the genome of oil palm. The Division has been fully operational along the palm oil value chain – from farm to food on the table.It released a self cheapest food in the form of coconut plantation estate, the processing of these materials in their own farm and then at refineries themselves, and finally, it is also processed cooking oil for the lo cal market. As a fully integrated player, this means that it can control the quality at every stage by using best practices in all walks of palm oil value chain. This process is done by thinking of the environment and quality, to ensure that when providing valuable material for the needs of the world, our earth is also protected through best practices.Sime Darby Property is one of the leading property developers in Malaysia. It is also the largest developers in the country in terms of land area savings. It now has 19. 000 acres of land and has identified savings of 18. 800 acres of land for future development. Sime Darby Property's core businesses are property development, property investment, hospitality & leisure and operations in China. Apart from Malaysia, it has a wide range of projects in five countries, namely, Singapore, Vietnam, China, Australia and the United Kingdom.Over the past few years, Sime Darby Property has built 10 townships that house a total of 80,000 families a nd 400,000 people throughout the Klang Valley and Penang, the Ara Damansara, Subang Jaya, USJ Heights, Putra Heights, Bukit Jelutong, Bandar Bukit Raja, Nature Trail, Melawati, The Dream and Planter's Haven. Sime Darby Property also rates limit investment property in Malaysia such as Sime Darby Pavilion is a 3-storey office building in Shah Alam, Sime Darby Complex is a 4 – ? torey office building, Wisma Guthrie is a six storey purpose built office building in Damansara Heights, Wisma Sime Darby is a 22 storey office building in Jalan Raja Laut, Wisma UEP is a 11-storey office building in Subang Jaya. Sime Darby Property has built a variety of hospitality in Malaysia such as Sime Darby Convention Centre (SDCC) which was officially launched on December 6, 2007 by the Prime Minister of Malaysia and Resumes Operations since February 2006 at the Bukit Kiara, Kuala Lumpur.Hospitaliti such as PNB Darby Park Executive Suites Start operations in June 2000 at the Kuala Lumpur. Harvard atmosphere Hotels in Bedong, Kedah. Genting View Resort in Genting Highlands, Pahang. Subang Avenue Service Suites in Subang Jaya and Hotel Equatorial Melaka in the Lower Town, Melaka. 3. Sime Darby Industrial Sime Darby Industrial is a leading distributor of premium heavy equipment in Malaysia and the Asia Pacific region.It offered a comprehensive range of products and support services equipment in key markets such as plantations, property, mining, marine construction, forestry, ports and power systems sectors. Sime Darby Industrial is also the fifth largest Caterpillar dealer in the world and operates the largest Caterpillar dealership network in the Asia Pacific region, with more than 100 branches covering more than 20 countries. Heavy equipment business spans across Malaysia, Singapore, Brunei, Australia, Hong Kong, China, Christmas Island, the Maldives, New Caledonia, Papua New Guinea, and the Solomon Islands.To market in Malaysia, Sime Darby Industrial Sdn Bhd offers a compre hensive list of heavy equipment and services, from the sale of machinery, new engines and equipment rental services through a network until CAT Rental Stores outlets nationwide. Other brands represented include: * Premium Terberg Terminal Tractor * Kubota Tractor and Agricultural Transplanters * Transport tractor New Holland * Perkins engines * GE Pipeline Inspection * Atlas Copco (in Vietnam) * Jacobsen Turf Care Equipment * Former operator of Omega 4. Sime Darby MotorsSime Darby Motors is one of the leading players of the automotive industry and automotive luxury in Malaysia, Singapore, China, Australia and New Zealand, with business activities that vary from country to country, including import, assembly, distribution and sale of the vehicle. This represents the various brands and luxury brands such as BMW, Mini, Rolls-Royce, Porsche, Jaguar and Lamborghini, Hyundai, Land Rover, Alfa Romeo, Ford, Peugeot, Mitsubishi, Ssang Yong, Jeep, Dodge, McLaren, Suzuki, Chrysler, Audi, Ferra ri, Maserati, Volkswagen, Nissan, Mazda and Chevrolet.Sime Darby Motors is also the third largest BMW dealer in the world, while Rolls Roycenya representation in East China is one of the largest in the world in 2011. This section is a dealer for McLaren to Hong Kong, the franchise up for grabs. It also has a distribution business for Huanghai Bus, Mitsubishi Fuso trucks and buses in Hong Kong and Macau, as well as electric vehicles Smith, apart from organizing Sime Darby Fleet Servicing Australia 4WD, 2WD, bus rental and mechanical services for industry leading market experts and government regional tourism market in Western Australia, Queensland and New South Wales.In terms of installation, Sime Darby Motors to install a variety of Hyundai passenger cars and commercial vehicles, other than passenger vehicles Land Rover and BMW through its subsidiaries, the Corporation Inokom in Kulim, Kedah. It also has the Hertz car rental business in Malaysia and Singapore. With a good distributi on network in the Asia Pacific region, the Automotive Division Sime Darby ready for a bright future. 5. Sime Darby Energy ; Utilities Sime Darby Energy ; Utilities has core businesses in the Engineering Services, Ports ; Logistics, Power and Water Management.It is supported by a staff of more than 1,000 people in all of our operations in Malaysia, Singapore, Thailand and China. I. Power With plants in Malaysia and Thailand, we have a combined gross capacity of 590MW. Operations in Malaysia which is located in Port Dickson, Negeri Sembilan have a capacity of 440MW of electricity while operating in Thailand at Laem Chabang has two power plants with an installed capacity of 100MW and 50MW respectively. II. Engineering Services Led by Mecomb Group, a unit of engineering services division is supported by a variety of reputable products that provide solutions and value-added engineering services.Mecomb Group is headquartered in Singapore and has operations in Malaysia and Thailand. III. P orts ; Logistics Port operations and logistics division is based in Shangdong province, China. There are three ports that operate at this time – a sea port handles general cargo and bulk in Bohai Bay, Weifang and two river ports handling coal and general cargo along the Grand Canal in Jining. A new coal handling terminal being planned in Jining. Port's current capacity to reach about 30 million tones per year with plans to expand further into the target handling capacity of 60 million tones per ear. We hope to become a major player in the arena harbor and logistics in China in the next five years. IV. Water Management Water management unit is headquartered in Shandong province of China, comprising Weifang Sime Darby Water Management Co. Ltd and Zibo Chemical Co. Ltd Sime Darby. Established in 2005, Weifang Sime Darby Water Management Co Ltd has a capacity of 140. 0003 per day, supplying clean water to the Hua Hai and surrounding industrial areas. Sime Darby Zibo Chemical Co. Ltd. Zibo) was incorporated in March 2007 to produce polyaluminium chloride at a capacity of four tones per year for use in water treatment plants Weifang Sime Darby Water. 6. Sime Darby Healthcare Sime Darby Healthcare is a leader in the private healthcare industry, and aspires to be the gold standard of health care providers in the Asia Pacific region. This section consists of five private entities, namely: – * Sime Darby Medical Centre Subang Jaya (SDMC SJ) – our flagship tertiary care 393-bed hospital * Sime Darby Specialist Centre Megah (SDSC Megah) – our outpatient and daycare * Sime Darby Nursing & Health Sciences College Sime Darby Medical Centre Ara Damansara (SDMC AD) – Centres of Excellence for Brain, Heart and Spine & Joint * Sime Darby Medical Centre Parkcity (SDMC Parkcity) – will open in 2013 This division was established on 21 October 2008 when the first three entities were rebranded under the brand name of Sime Darby. Sime Darby He althcare offers a range of special services for health care related to Customers, from emergency care, disease; management to screening services and more terrorism as follows: * Dietetics Services Dr Golf * Health Screening Centre * Imaging and Diagnostics * Breast Care Centre * Subang Fertility Centre * Obesity Clinic * Menstrual Clinic * Nuclear Medicine & PET / CT Centre * Vascular & Interventional Radiology Centre * Stone Centre * Digestive and Liver Health Clinic * Blood Disease Centre In addition to health care for Patients, Sime Darby Healthcare Patient Services Banjarmasin also rates offers for hire offer Home Care Nursing Services, International Patient Services, Medical Reports and Accommodation ServicesIt institutions, SDMC SJ, is one of the leading private hospitals in Malaysia. Internationally recognized, private hospitals with advanced facilities, this is the only private hospital that has won the Prime Minister's Quality Award twice. Today, SDMC SJ has 393 beds, 93 su ites and 14 theaters clinic, keep up to 1,800 patients and 300 patients per day. The hospital also offers the latest state of the art equipment such as scanners 64-slice PET / CT, 3-Tesla MRI, High Dose 3D brachytherapy system, dual-source CT scanner and TomoTherapy Hi-Art System for the treatment of cancer.SDMC AD had the first private Brain Centre of Excellence in Malaysia, with a comprehensive epilepsy management system as well as full and advanced facilities for treatment. Sime Darby Healthcare is planning to open another medical center renamed Sime Darby Medical Centre ParkCity in 2013. Sime Darby Medical Centre ParkCity will operate as a comprehensive center of excellence dedicated to women and children with a focus on breast oncology, child development and treatment of chronic diseases such as diabetes. 7. Other BusinessesI. Tesco Stores (Malaysia) Sdn Ltd Tesco Stores (Malaysia) Sdn. Ltd. is a joint venture between Sime Darby Berhad and Tesco plc. Its inception in the year 2 001, show that the Sime Darby owns 30% interest in the joint venture. Tesco currently operates 40 hypermarkets in the country. II. Insurance Broking and Agency Sime Darby Lockton Insurance Brokers Sdn Bhd (Sime Darby Lockton) is one of the leading professional risk services in Malaysia, which specialized in the specialty risk insurance and takaful solutions.The company is the result of a union between Sime Darby Berhad and Lockton, the risk of a service company to the 9 largest in the world. With active involvement in insurance services since early 1930 in Asia, particularly in Malaysia, Singapore and Hong Kong, Sime Darby Lockton has more than 80 dedicated professionals, highly trained and knowledgeable in their respective fields. Sime Darby Lockton is licensed and regulated by Bank Negara Malaysia. HISTORICAL BACKGROUND Almost 200 years ago, Britons growers have established rubber plantations in Malaya and mostly planted with oil palm.Among the pioneers-pioneers is Alexander Guthr ie, Daniel and Smith Harrison, Joseph Crosfield, William Sime and Henry d'Esterre and Herbert Mitford Darby who is the founder of three large companies today are Sime Darby Berhad. Alexander Guthrie Guthrie & Co established. in Singapore in 1821 as the first British trading company in Southeast Asia. Guthrie introduced rubber and palm oil in Malaysia in 1896 and 1924. Daniel and Smith Harrison and Joseph Crosfield also formed a trading partnership tea and coffees are known as Harrisons & Crosfield in England in 1844. Harrisons & Crosfield bought several small farms in Malaysia of ? 0,000 and they came together to form Golden Hope Rubber Estate. In 1982, Harrison and Crossfield have sold three large plantation groups, Golden Hope, Pataling, and London Asiatic to Malaysian concerns for ? 146 million. Business name was changed to Golden Hope Plantations Berhad in 1990 after taking majority Nasional Berhad capitalization equity. In January 2007, three giant Malaysia (Sime Darby, Guthrie and Golden Hope) incorporated into the entity named Synergy Drive vehicle and on 27 November 2007, Synergy Drive renamed Sime Darby Berhad. Entity that combines three different companies in Malaysia are multinational workforce of 104. 00 Malaysian workers. Its core businesses are plantations, property, motor, heavy equipment and energy & utilities that are expected to benefit from continued population growth and economic development in the Asia Pacific region and the global economy. Non-core business unit of Sime Darby as health care, insurance, and home products grouped under Allied Products and Services division (APS). Subsidiary under the APS including Sime Darby Medical Centre Subang Jaya (formerly known as Subang Jaya Medical Centre) (health care), Sime Alexander Forbes (insurance), and Dunlopillo Malaysia Sdn Bhd (home products).It also has a controlling stake in the supermarket chain Tesco in Malaysia. Sime Darby is a multinational company, with more than 60 percent of the g roup's revenue comes from overseas. As a result of the merger, Sime Darby became one of the leading companies listed on the world's palm oil plantations. Sime Darby Berhad also has a significant presence in downstream palm oil. The merger also made Sime Darby a leading developer of residential and commercial community. Additionally, it holds the rights Caterpillar in 12 countries worldwide and distribution and distributor brands like BMW motor.Current President and Chief Executive Officer of the Group is Dato ‘Mohd Bakke Saleh. Sime Darby brand now more than 100 years old even though it does not explain how these companies are just starting with a small shop in Malacca memoirs starting in 1910. It is the legacy of the three companies that create Sime Darby today. PROBLEM Although Sime darby a giant plantation company in the world, they still have problems such as the company's internal operations and management models that lack of transparency, poor governance, red tape, and m isconduct (moral hazard) that may affect the business.This is a result of the merger of three companies Golden Hope Limited. , Guthrie Bhd. and Sime Darby Bhd. through Synergy Drive to form a giant company where five times of its original size. With the merger of these companies have the inherent problems of bureaucracy and management. In May 2010, the Energy and Utilities Division has reported large losses where four projects the Energy and Utilities Division, including Qatar Petroleum, Maersk Oil Qatar, Marine and Bakun Dam, delayed because of bad management, leading to increased costs exceeded estimates and lead to a loss of RM1. 31 billion. As a result of these losses, Sime Darby has experienced the loss of market value of RM6. 37 billion in the period of one month from the RM52. 94 billion to RM46. 57 billion. Sime Darby has experienced a net loss of RM308. 63 million in the third quarter. Sime Darby yet to recover from past losses continued to be constrained problems associate d with neighboring countries, namely Indonesia.Kumpulan Guthrie Berhad was ordered to pay the civil claim to the Indonesian company PT Adhiyasa Saranamas more than USD25 million. Kumpulan Guthrie Berhad plans to capture asset PT Holdico power was taken over by the National Banking Penyehatan Agency (IBRA) owned by the Indonesian government. PT Adhiyasa Saranamas was appointed by Kumpulan Guthrie Berhad as an intermediary for the acquisition of PT Holdico Power, including its subsidiaries and assets of the company including oil palm plantations in several cities.Problems began to arise when the Guthrie Berhad has agreed to pay 7% of the transaction value results for Adhiyasa been breached by the Guthrie Berhad resulting in a Malaysian government-owned companies have been accused of breach of contract because of delayed payments promised to Adhiyasa. Sime Darby has also suffered huge losses during the financial crisis era asia 1997 when the stock market plummeted, which recorded a los s of Rs 1. 6 billion, of which the largest level in the history of banking in Malaysia. 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