KUALA LUMPUR (April 17): Hong Leong IB Research has downgraded Ann Joo Resources Bhd to “Sell” at RM1.76 with a lower target price (TP) of RM1.41 (from RM1.53) and said the gradual pickup in construction activity is unlikely to translate to better operating margins for Ann Joo.

In a note today, the research house said the marginal rise in steel bar and billet are insufficient to mitigate higher raw materials price (i.e. iron ore and scrap metal).

“To cushion the risk, Ann Joo is looking to the export market where the demand is more stable.

“We revise lower our forecast by -7.9% and -2.1% in FY19 and FY20 to account for higher raw material price.

“Downgrade to Sell, with TP: RM1.41 based on 8x P/E and FY19 EPS. With share price up 41% YTD, we feel this is an opportune time to take money off the table,” it said.