Sime Darby expected to ride on expansion plan PETALING JAYA: Sime Darby Bhd's recent acquisition of Salmon Earthmoving Holdings is seen as a further diversification of its business and an entry into the construction industry in Australia. In view of this, Sime Darby deserves a second look as an investment proposition, said TA Research, which tagged a "buy call" on the counter with an unchanged target price of RM2.92 per share. Its target price is based on the calendar year 2022 sum-of-parts valuation, it said, noting that Sime Darby will be able to ride on the cyclical recovery and its long-term business expansion plan. The A$104mil, or circa RM327mil, acquisition will complement and strengthen Sime Darby's existing business in Australia and reinforce its presence in the Asia Pacific in terms of value chain offering. The acquisition is very close to the company's book value. Based on management guidance, the acquisition is priced at 5.6 times the enterprise value to earnings before interest, taxes, depreciation and amortisation with an implied price to earnings ratio (PER) of around 10 times, TA said. "We deem this acquisition fair and attractive given that most of the players in the equipment rental market are trading at high double-digit PER," it said. The research house did not change its earnings estimates for Sime Darby pending a finalisation of the deal. Salmon Earthmoving is a leading provider of rental and maintenance services in Australia which provides services to the civil construction, agricultural and mining industries. Meanwhile, PublicInvest Research maintained it outperform call on Sime Darby with a sum-of-parts-based unchanged target price of RM2.78. PublicInvest said it is positive on the acquisition as this will also allow Sime Darby to capitalise on the Australian government's ten years A$15.2bil (RM47.17bil) infrastructure project stimulus that was recently announced. "In terms of earnings contribution, Salmon is expected to add A$13mil (RM41mil) in profit before interest and taxes a year to the Sime Darby group, " PublicInvest said."This only translates to a 3% enhancement to the financial year 2022 (FY22) to FY23 forecast earnings, " it added. The acquisition, which is expected to be financed with debt, will lead to an increase in the group's gearing from 0.09 times to 0.11 times, it noted. Source: Adapted from The Star, 9 July 2021. Question 3 (a) Content theories of motivation are concerned with what motivates people and what needs do people seek in order to have work satisfaction. In this regard, apply Herzberg's Two-factor Theory, one of the content motivational theories to examine how employees working with a conglomerate are motivated. (10 marks) (b) In your opinion, does the approach to ethnocentrism fit well into managing both the business activities and people of conglomerate like Sime Darby Bhd.? Justify your answer. (10 marks)