KUALA LUMPUR (Sept 08): NTPM Holdings Bhd shares fell as much as 5.5 sen or 6.86% each in morning trade, after the tissue paper manufacturer reported a 41.47% fall in quarterly net profit.
The stock ended the morning session at 75.5 sen, down 4.5 sen or 5.62% with 3.41 million units changing hands.
The counter was in the negative territory throughout the morning, trading between 74.5 sen and 79 sen.
Last Friday, NTPM said its net profit for the first quarter ended July 31, 2014, plunged 41.47% to RM7 million from RM11.96 million a year earlier, due to higher cost of raw material, labour and utility, especially electricity and natural gas.
Revenue however, grew marginally by 0.4% to RM132.24 million, from RM131.75 million.
In a note to clients today, Public Investment Bank cut NTPM's earnings forecast for the current year (FY15) and next year (FY16) by 24% and 26, respectively.
The bank also revised its call on the counter to "neutral" with a target price of 82 sen, pegged to 16 times price earnings ratio (PER) multiple.
"We are bearish on NTPM for the near-term on the back of uncertain prospects for the group, given current challenges of escalating cost pressures and competitive industry players," it said.
Public Investment projected NTPM to record RM584.7 million in revenue and RM73.4 million in net profit for FY15, and RM636.7 million and RM80.9 million respectively for FY16..
RHB Research, meanwhile, has decided to trim NTPM’s FY15 and FY16 earnings forecasts by 24% and 19% respectively..
While noting that NTPM's management has embarked on a strategic cost management in view of rising raw material and other overheads, it believed that there will be a time lag in the implementation of these measures.
"We also downgraded our recommendation to sell from neutral, following our earnings revision. The fair value is also lowered to 70 sen, from 82sen previously," RHB said.
This, the bank said, was based on an unchanged 15.5 times price to earnings ratio (PER) on calender year 2015 (CY15) earnings per share (EPS).
"The stock is currently trading at a CY15 PER of 18 times, which we deem slightly expensive, relative to its peers of 16 times," RHB said.
The research house said the key risks of the counter include faster-than-expected margin recovery and favourable changes in raw material prices.
RHB projected that NTPM may pull in RM541 million in revenue and RM 53.9 million in net profit for FY15.
"For FY16, NTPM's net profit may drop to RM44.9 million, despite revenue continuing to grow to RM584 million," it said.