KUALA LUMPUR (May 28): Hong Leong IB Research has upgraded Ann Joo Resources Bhd to “Hold” (from Sell) with a higher target price of RM1.02 (from 98 sen) and said Ann Joo’s 1QFY15 core net profit of RM2.1 million came in below expectations, accounting for only 6% and 6.6% of consensus and house full-year forecasts.

In a note today, HLIB Research said key deviations were lower-than-expected sales tonnage, and additional RM6 million write-down of raw materials.

HLIB Research said FY15-16 net profit forecasts were cut by 52.3% and 32.7% to RM15.4 million and RM38.2 million respectively, largely to account for lower production volume and selling price assumptions.

“We also took this opportunity to switch our valuation methodology to P/B (0.5x P/B, in line with its historical trough valuation cycle) from P/E previously, given our less-bullish view on its near-term earnings prospects and its high book value.

“Post valuation methodology rationalisation, our target price on the stock has been raised slightly from RM0.98 to RM1.02 (based on 0.5x P/B). Recommendation upgraded from Sell to Hold, due to the recent share price weakness,”it said.