KUALA LUMPUR (Nov 15): Affin Hwang Capital Research has downgraded Kuala Lumpur Kepong Bhd (KLK) to “Sell” at RM24.92 with a lower target price of RM21.70 (from RM23.20) and said KLK’s FY18 core net profit of RM782.9 million accounted for 98% and 81% of house and consensus FY18 core EPS respectively.

In a note today, the research house said plantations, property and investment holding profit were lower year-on-year, while manufacturing profit increased.

“Due to the weakness in CPO prices as well as our higher production cost assumptions, we cut our FY19-20 core EPS forecasts by 22-23%.

“Given the earnings forecast revisions and despite a higher target PER of 26.5x (based on KLK’s 5-year mean after taking into account KLK’s size, status and liquidity; previously 22x) applied to our CY19E core EPS, we lower our 12-month target price to RM21.70.

“Given the downside potential, we downgrade KLK to a Sell rating,” it said.