Yes, CIMB Did Downgrade Pelikan To Underperform

Dear BL,

I have refrained from answering directly on stocks specific. However, since your question was on Pelikan as I had blogged on it before on 20th March 2009. Some Comments On Pelikan Holdings

As you can see CIMB HAD already declared Pelikan as a trading buy then.

Despite, the weaker financial results and the worsening balance sheet, CIMB declared Pelikan as a trading buy (on 17th March) when it was 59.5 sen. Their reasoning was they reckon the market over did the selling and priced the stock as if the company was going to go bust.

And when I blogged on it a couple of days later on 20th March, the stock was up already at 70 sen. (I was amazed by the disposal of shares by them insiders and of course how rather extremely handy the share buybacks. :p2)

And yes, I did note the 'turnaround' in Pelikan's earnings when it reported its earnings. Pelikan reported some 8 million in earnings. Much, much better than the massive losses it posted earlier and if you would note, the 8 million earnings pales in comparison to what Pelikan made the same quarter the previous year of 24 million.

Anyway, the day after, Pelikan announced its earnings, CIMB downgraded Pelikan to UNDER Perform despite its 'turnaround' earnings.

Now not saying I agree with CIMB's point of view, but with the stock at 99 sen ( the stock was just 59.5 sen less than 2 months ago), I suspect that perhaps CIMB reckons that the stock had already 'priced in' the turnaround.

• Upping target price. Although we are keeping our earnings forecasts, we are raising our target price from RM0.78 to RM0.92 as we narrow the discount to the 13x sector target P/E from 40% to 30%. The smaller discount reflects a lower equity risk premium in view of more bullish investor sentiment.
  • Downgrade to UNDERPERFORM. However, we are downgrading the stock from trading buy to UNDERPERFORM. The share price resurgence by more than 60% since our upgrade in mid-Mar has taken it past our target price. We think it is likely to underperform given the potential de-rating catalysts of i) weaker-than-expected revenue in 2Q09, ii) further economic slowdown in Europe and iii) unattractive dividend yields of around 2.7-3.0%.

Note..

ps: do note that CIMB's fy2009 forecast is based on net profit of 39 million. Pelikan only made 8 million for the first quarter. Yeah, growth is expected or as they said 'priced in'. (some say 'priced up')

ps/ps: I do not like the CIMB's header 'Bird Flu'. Rather lacking.

ps/ps/ps: I do note that Pelikan today is no longer a penny stock.

ps/ps/ps/ps: I surely do not know how the stock would trade. Yes, I do not know if the stock would go up or down.

ps/ps/ps/ps/ps: Sorry, I do not know what you should do. I am not a financial adviser. And more so, money is yours not mine one.