The investment bank said 66% of its order book is attributed to the Australian market, mainly the mining sector due to the still highly profitable coal prices, while margins are expected to sustain based on strong demand for maintenance and overhaul services.

“Demand for construction equipment may see some recovery trend as Malaysia and Singapore start implementing mega infrastructure projects,” it said in a note.

It said Sime Darby will fully consolidate UMW Holdings from the third quarter of 2024 (Q3 FY2024) onwards, which will further support its earnings growth.

It acquired the 61.2% stake in UMW Holdings in December 2023 and invoked a compulsory acquisition of the remaining shares in mid-January, following an additional 22.7% acceptance from the mandatory general offer exercise.

“In the near term, UMW will be managed as an independent business unit, while management continues to explore potential synergies and integration of business models,” it said.

Meanwhile, RHB Investment Bank Bhd (RHB IB) reckoned the industrial division would record robust numbers, supported by the full contributions from Australia’s Cavpower.

“Its China industrial unit is expected to remain weak given the current macroeconomic headwinds while electric vehicle (EV) overcapacity may see the price war going on for longer.

“In Malaysia, we expect the motor segment to chart stronger results driven by a flurry of new EV launches, while the UMW acquisition should increase its overall earnings base moving forward,” it said.

Due to the consolidation of UMW Holdings, RHB IB said it has lifted FY2024-FY2026 forecast earnings by 17%-22%.

It, however, cut bottom-line estimates for China for the industrial and motor segments, given the continuing weak sentiment there.

Both investment banks also maintained their ‘buy’ recommendations on Sime Darby stocks.

As at 3.01pm, Sime Darby’s share price was down by two sen or 0.76% at RM2.61, giving it a market capitalisation of RM17.86 billion.