MAYBANK IB CUTS SOP’S EARNINGS FORECAST
Research house lowers target price to RM2.64 with ‘hold’ call
MAYBANK Investment Bank (Maybank IB) has cut its earnings forecast for Sarawak Oil Palms Bhd (SOP) until financial year 2020 on weak crude palm oil average selling price and higher cost next year.
“While we continue to like SOP for its growth prospects and strategic oil palm estates with property development potential in Miri, there is a lack of immediate catalyst to excite investors for now,” it said in a note.
Maybank IB has also reduced fresh fruit bunch output forecast for the plantation firm by six to seven per cent per annum from financial years 2018 to 2020.
This implies a negative growth of two per cent for financial year 2018, but a positive growth of 10 and nine per cent, respectively, for financial years 2019 and 2020.
“SOP’s output has disappointed, similar to the industry, but also partly due to the slow progress made in improving road access to the newly acquired Murum estates, hampering crop evacuation,” it said.
Maybank IB has lowered SOP’s target price to RM2.63 from RM3.10. It, however, maintained a “hold” call on the stock.
SOPs’ core net profit of RM18 million declined 69 per cent yearon-year in the third quarter of the year. This brings its core profit for the nine months to RM54 million, 72 per cent lower year-onyear, meeting just 43 per cent of Maybank IB’s full-year forecast.
The earnings in the third quarter were affected mainly by lower crude palm oil average selling price and higher cost.