KUALA LUMPUR: RHB Research has upgraded NTPM Holdings to Neutral from Sell with a target price of 67 sen pegged to 15.5 times P/E on CY15 EPS, which is at a 22% discount to its peer average of 20 times.
"However we lift our call to Neutral as we believe most of the downsides have been priced in. We also believe NTPM’s on-going cost containment and optimisation exercises will put the company in a better competitive position in the future," it said.
In a note on Monday, RHB said that 1HFY15 EBIT and PBT margins trended lower by 550bps and 570 bps respectively, both its divisions booked weaker margins.
"We earlier expected FY15 to be a challenging year for NTPM.
"With its recent unfavourable forex position, we continue to expect a slight weakening in NTPM’s margin going forward.
"Thus, we further cut our earnings forecast by 12.6% for FY15, as we revise our dollar/ringgit assumption to 3.30 (from 3.20), in line with our house view. Volatile raw material prices and weaker demand remain as the key risks," it said.
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