CIMB: Malaysian Pacific Industries 1H profit misses forecast

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KUALA LUMPUR (Jan 30): CIMB Investment Bank Bhd downgraded its Malaysian Pacific Industries Bhd (MPI) earnings forecast and share target price (TP) after MPI reported first-half profit, which missed market forecast.

Yesterday, MPI said net profit fell to RM77.44 million in the first half ended Dec 31, 2017 (1HFY18) from RM94.7 million a year earlier. Today, CIMB wrote in a note that MPI's 1HFY18 core net profit missed expectations at 42% and 44% of CIMB's and consensus full-year forecast respectively due to higher-than-expected raw material cost.

"We cut our FY18-20F EPS by 10-14% to account for the higher raw material costs and to reflect the strengthening of the ringgit against US$. We apply a lower average forex assumption of RM4.00 for FY18-20F, in line with CIMB's forecast. However, we see downside risk to earnings if the ringgit continues to strengthen against US$. Based on our sensitivity analysis, we estimate that every 1% movement in ringgit/US$ could impact the group's EPS by 1.5%," CIMB said.

CIMB said it maintained its hold call on MPI shares with a lower TP at RM12 versus RM15 previously.

Affin Hwang Investment Bank Bhd said it maintained its sell call for MPI shares with a lower TP of RM10.30 versus RM12 previously.

"On the whole, (MPI's) results were below expectations accounting for 43% and 42% of our and the street's FY18 estimates (respectively)," Affin Hwang said.