KUALA LUMPUR (May 23): Affin Hwang Investment Bank on Monday (May 23) downgraded Sime Darby Plantation Bhd to "sell" (from "hold") as it cut its target price (TP) to RM4.75 (from RM5.35).

Affin Hwang analyst Nadia Aquidah said in a note that she lowered her TP for Sime Darby Plantation after earnings forecast revisions and rolling forward her valuation horizon and applying a higher discount rate given that crude palm oil (CPO) prices had likely peaked and the potential risk of a reverse in foreign shareholdings.

Meanwhile, she said Sime Darby Plantation’s core net profit of RM813 million (+62.3% year-on-year) for the first quarter ended March 31, 2022 (1QFY22) came in within her expectations.

She made no changes to her FY22 core earnings per share (EPS) forecast as the results were within her expectations.

However, she raised her FY23/24 core EPS estimates by 13.3%/4.8% mainly to take into account higher CPO price assumptions of RM4,000/RM3,300 per ton.

“We expect global edible oil stock levels to take time to recover due to expectations of a prolonged Ukraine-Russia war as well as disruption from adverse weather conditions,” she said.

At 10.01am on Monday, Sime Darby Plantation had fallen four sen or 0.77% to RM5.14, valuing the group at RM35.82 billion.

Year to date, the counter has risen 33.85%.