At 10.44am, it was down 14 sen to RM2.31. There were 144,700 shares done.
The FBM KLCI was up 7.46 points or 0.41% to 1,805.57. Turnover was 846.97 million shares valued at RM607.07mil. There were 398 gainers, 289 losers and 323 counters unchanged.
CIMB Equities Research said at 25% of its full-year forecast, Kawan’s 1HFY18 net profit was below market and its expectations mainly due to weak US export revenue and strong RM/US$.
Kawan’s new factory, which started commercial operations in July, tripled the existing capacity of roti paratha and chapati.
“We cut our FY18F EPS by 31.5% to reflect delays in the commercial launch of the new factory from June to July this year, and also assume RM5mil start-up costs for the new factory.
“We also cut FY19-20F by 9.3-12% to reflect expected higher marketing costs to boost topline growth. Stronger US$ environment (RM/US$ at 4.10 currently) should benefit export sales.
“TP falls from RM3.14 to RM2.76 and the stock remains an Add. Higher export revenue and strong US$/RM are potential re-rating catalysts,” the research house said.
CIMB Research said Kawan’s 1HFY18 revenue fell 3.8% on-year to RM98.7mil mainly due to weak US export revenue (offset by strong domestic revenue), higher promotional costs and stronger RM vs. US$ in 1HFY18 (average 1HFY18 RM/US$ was RM3.86 in 1H18 vs. RM3.07 in 1HFY17).
Exports contributed around 60% of the group’s overall revenue in 1H18, mainly denominated in US$.
The research house said Kawan remains an Add. Its target price falls to RM2.76 based on unchanged 2019F 20 times P/E, a 20% discount to its 25 times P/E target for the F&B sector.
Key potential re-rating catalysts are the successful take-off for the new factory, higher export revenue and strong US$/RM rate. Downside risks are continued weak US export sales.