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Thursday, August 18, 2011

CIMB Research maintains Neutral on MSM (Edge)

CIMB Equities Research is maintaining its Neutral outlook on MSM Malaysia Holdings Bhd but raising its target price from RM5.50 to RM5.82.

The research house said on Thursday, Aug 18 MSM’s 1H11 net profit was at 47% of its full-year projection and 51% of consensus estimates.

It said the 1H net profit matched its expectations but was above consensus given the seasonally higher domestic sales volume in 2H.

“The absence of a dividend was not a surprise and we expect dividends to be declared in subsequent quarters.

“Our earnings forecasts are intact. However, we are raising our target price from RM5.50 to RM5.82 for a higher target forward P/E of 13.8x as we cut our discount to the target market P/E from 10% to 5% given the appeal of MSM’s resilient earnings profile during these uncertain times and share price resilience in volatile stock market conditions,” it said.

CIMB Research said it remained NEUTRAL on the stock as its defensive qualities are balanced by several uncertainties, i.e. the expiry of raw sugar contracts, new entrants and rising costs.

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