ADVENTA - A poor showing; maintain UNDERPERFORM (CIMB)

At 35% of our full-year forecast and 32% of consensus numbers, Adventa’s 1HFY10/11 net profit was below expectations. The poor results were due to higher costs and delays in cost passthrough, which lopped 6.7% pts off EBIT margins to 4.2%. The absence of dividends was expected. Due to the results shortfall, we now trim our FY11-13 EPS forecasts by 14-18%. This reduces our target price from RM2.43 to RM2.01, still based on 9.14x forward P/E or a 30% discount to Top Glove’s target P/E of 13.05x. Adventa remains an UNDERPERFORM as we believe that challenges such as higher energy costs, consensus downgrades and high switching costs will be de-rating factors for the stock.