Affin Cuts MSM Malaysia To Reduce; Lowers Target

14 Aug 2012

Affin IB downgrades MSM Malaysia Holdings (5202.KU) to Reduce from Add with a lower target of MYR5.10 from MYR5.30 previously after cutting its earnings estimate to take into account weaker-than-forecast 1H results; core net profit of MYR115.2 million came in below expectations, accounting for only 42% of consensus full year estimates.   The house cuts FY12-FY14 net profit forecast by 2%-4% though it still expects stronger earnings in 2H from higher sales volume in tandem with the upcoming festive season and margin improvement as MSM draws down on lower priced raw sugar inventory purchased in 2Q.  "The recent increase in raw sugar prices (+8% since its trough of 18.9 US cents/lb) and risk of further price spikes as a result of the global weather conditions could hamper margin recovery," says Affin.  The stock is currently down 1.1% at MYR5.19.