8 August 2008
UNDERPERFORM Downgraded
RM2.69 Target: RM2.86
Mkt.Cap: RM2,152m/US$657m
Dry spell..........................oil price of US$120 per barrel.
foreword(序言) is repeated please click here if you want to read
Valuation and recommendation
Pruning target price to RM2.86. We are leaving our earnings forecasts unchanged but have lowered our target price from RM3.20 to RM2.86. Our target price cut stems from our decision to reduce our forward P/E target from 10x to 9x to reflect our concern over the downside risk to CPO price. Among the Malaysian listed planters, Hap Seng Plantation is the most sensitive to changes in CPO price as it is the purest CPO play and, to our knowledge, has sold forward only 10% of next year’s crop.
Downgrade to UNDERPERFORM. We are cutting our rating for the stock from Neutral to UNDERPERFORM, in line with our target price downgrade. Factors that could trigger a de-rating are the declining CPO and crude oil price as well as rising operating costs. However, its share price is partially supported by its high dividend yield of 9%.
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