CIMB Research maintains Hold on Oriental, ups target price to RM7.44

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KUALA LUMPUR (Nov 24): CIMB Research has maintained its Hold rating on Oriental Holdings Bhd at RM7.15 with a higher target price of RM7.44 (from RM7.38) and said that at 85% of its full-year forecast, Oriental’s 9M14 core net profit was above expectation.

In a note Nov 21, the research house said the outperformance came mainly from stronger-than-expected plantations earnings.

It said no dividend was declared, as expected.

“We raise our FY14-16 EPS by 12-13% to account for stronger FFB output growth.

“This leads to a higher target price of RM7.44, still based on its 5-year historical average P/BV of 0.9x.

“Although Oriental appears undervalued, we maintain our Hold rating due to unexciting earnings growth outlook. We prefer First Resources for higher upside,” it said.

CIMB Research said it expects Oriental’s earnings to be weaker next quarter as a result of lower palm product prices.

“On top of that, start-up expenses from its new hospital in Malacca, which is expected to commence operation in 4Q, should drag its earnings lower.

“The new hospital may take up to seven years to break even,” it said.