Featured Report: OSK on Pelikan Holdings

Pelikan was a stock that I had followed. The stock has had one nice run since March. Here are the postings I had made since March 2009.

• Some Comments On Pelikan Holdings
• More On Pelikan Again
• Yes, CIMB Did Downgrade Pelikan To Underperform

Today OSK featured a report on Pelikan.

Once again I was bemused at how quickly the 'value' of this company had changed from OSK's perspective.

Let's have a look at how OSK style of valuation on Pelikan Holdings since Jan 2009.

• Maintain NEUTRAL. We maintain our FY09 and FY10 forecasts at RM81.7m and RM86.8m for now,pending the release of its 4QFY08 results. The TP is unchanged at RM1.23 as the stock lacks near term catalysts, given that most of the European economies (its biggest export market) are in recession. While consumers may down trade to cheaper stationeries under the current environment, the business is somewhat defensive, further underpinned by Pelikan’s strong branding.

Jan 15th 2009. Maintain Neutral at 1.23.

March 2nd 2009. Pelikan announced huge quarterly losses.

• We cut FY09/10 forecasts by 30%, after factoring in lower sales, further contraction in margins and adjustments to depreciation and interest rates. TP has been reduced to RM1.00.

The cut their forecasts by a massive 30% and the Target Price (TP) has been reduced to 1.00 from 1.23.

However, since Pelikan had already fallen to a mere 0.97 sen, I guess there was some justification when OSK called Pelikan a neutral, despite the massive reduction in earnings forecasts and target prices.

However, the stock was punished severely by the market. Come 16th March 2009, Pelikan traded as low as 0.59 sen.

And OSK had no commentary.

On 14th April 2009, Pelikan had recovered to 0.89. OSK then decided to publish another report.

They cut the earnings and the target price is now only 0.80. Despite all this, again they maintain their call as NEUTRAL.

• Cutting earnings. We do not expect Pelikan’s performance to recover in the mid term as long as consumer sentiment in Europe remains subdued. Hence, we are slashing our FY09/10 forecast by an average of 38%, pegged at trough 0.45x P/BV. Based on the current share price, Pelikan is trading at the low valuation 0.5 P/BV. While this may indicates that the stock has been oversold, we are maintaining our NEUTRAL call as we believe that the selling pressure will persist on worse-than-expected results in the coming quarterly earnings and its still-high foreign shareholding level of 26%.

May 28th 2009. Pelikan announced its quarterly earnings and OSK had this to say.

• Maintain NEUTRAL. We maintain our earnings forecast but increased our TP to RM1.07 as we peg the stock at a higher PE of 6.5x FY10 EPS and 0.8x P/BV as we expect the economy to recover gradually in 2H09 and hence a recovery in its profit, leveraging on its strong worldwide brand and the fact that it is involved in selling basic necessities.

Earnings forecasts were maintained and they mainted their call at NEUTRAL but their target price had been increased from 0.80 to 1.07.

That's a 33.8% increase in target price (hope my calculator is not faulty!)

And they call it a NEUTRAL.

LOL!

And today, with Pelikan already trading at 1.24, OSK are calling it a BUY with a target price of 1.85!

I kid you not. :p2

• .... Given that much of the downside has been priced in, we now upgrade the stock to a BUY with a revised TP of RM1.85 (4-year historical average PE and P/BV of 9.5x and 1.5x respectively on FY10 forecast).

Huh?

Downside had been priced in?

Didn't Pelikan trade as low as 0.59 back in March? Now it's 1.24. LOL!

So let's summarise.

1. Jan 15th 2009. Maintain Neutral. Target Price at 1.23.
2. March 2nd 2009. Maintain Neutral. Target Price at 1.00.
3. April 14th 2009. Maintain Neutral. Target Price at 0.80.
4. May 28th 2009. Maintain Neutral. Target Price at 1.07.
5. July 20th 2009. BUY call. Target Price at 1.85.

How now my dearest?

Since Jan 2009, OSK had a target price for Pelikan from 1.23 to 0.80 to 1.85.

My oh my. Just love how OSK play with their target prices. LOL!

:D

This posting might interest you also: What Hope For Malaysian Investing Public When Research House Makes Such Calls?