KUALA LUMPUR (May 17): CIMB Research has cut its earnings forecasts for IOI Corp Bhd but is maintaining its "hold" call and target price for the plantation giant's shares after the group reported weaker-than-expected results.

CIMB Research said the RM826 million net profit (excluding forex translation loss and gain from sale of assets) reported by IOI Corp for the nine months ended March 31, 2017 accounted for only 65% of the research house's full-year forecast and 69% of consensus full-year estimate.

IOI Corp's weaker performance was due mainly to lower manufacturing contribution.

CIMB Research said it has cut its earnings per share estimates for IOI Corp by 4% to 5% for the financial year ended June 30, 2017 (FY17) to FY19 to incorporate the lower manufacturing profit margin in the third quarter of FY17.

"However, our sum-of-parts-based target price of RM4.64 is not affected as we value our manufacturing division based on price-to-book value (P/BV)," it said.

CIMB Research has maintained its "hold" call on IOI Corp as it sees share price support from a potential buy-back exercise and rich assets.

Meanwhile, Hong Leong Investment Bank Research said it likes IOI Corp for its efficient plantation management, as evidenced by its superior fresh fruit bunches yield vis-à-vis the industry average, healthy balance sheet with its net gearing of 0.66 times as at FY16 and strong operating cash flow generation of RM1.63 billion or 26 sen per share in FY16.

However, it said further upside for IOI Corp is capped by its lofty valuation for FY17 to FY18 PER of 22.1 times and 21.5 times respectively.

The research house maintains its target price at RM4.69, with a hold recommendation on the stock.

IOI Corp shares were down 4 sen or 0.9% at RM4.60 as at 4pm, with 146,800 shares traded, for a market capitalisation of about RM30 billion.