KUALA LUMPUR: Affin Hwang Capital research has downgraded Genting Plantations to a hold rating from buy following 9M18 core net profit falling below forecasts.
"Due to weakness in CPO prices as well as our higher production cost assumptions, we cut our 2018-20E core EPS forecasts by 34-46%.
"Given the earnings cut and despite a higher target PER of 33x (based on GENP’s 5-year mean) applied to our 2019E core EPS, we lower our TP to RM9.76," it said.
According to the research firm, 9M18 pre-tax profit declined 39.5% year-on-year to RM192.9mil due to lower pofit from the upstream plantation division, which was partially offset by higher profit conributions from the property and downstream manufacturing divisions.
"After adjusting for one-off items, which includes forex losses and gains from the acquisition of land by the government, 9M18 core net profit declined by 42.2% yoy to RM134.2m, accounting for 42.2% and 46.7% of our and consensus 2018 forecasts, respectively.
"This is below our expectation mainly due to weaker profit margins, especially from the upstream plantation division," said Affin Hwang.
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