IOI Corp’s FY6/11 core net profit missed our forecast by 4% and was 8% short of consensus estimates. The main culprit was a weaker-than-expected manufacturing division. We are cutting our FY12-13 earnings forecasts by 4% for lower profit margins from manufacturing. Our target price is reduced from RM5.48 to RM4.76 because of the earnings downgrade and a lower target P/E of 14.5x instead of 16x to reflect slower global growth and recent cuts to our target P/Es for its regional peers. We maintain our UNDERPERFORM call as the stock may continue to de-rate due to its growing property exposure and subdued yield improvement at its estates. We prefer Wilmar.
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