HLIB Research downgrades HPMT to ‘hold’, cuts target price to 39 sen

TheEdge Wed, Oct 21, 2020 11:17am - 3 years View Original


KUALA LUMPUR (Oct 21): Hong Leong Investment Bank (HLIB) Research has downgraded its rating of HPMT Holdings Bhd to "hold", while cutting its target price (TP) to 39 sen from 42 sen previously, to account for higher earnings risk due to uncertainties arising from Covid-19. 

In a note today, the research house said various European countries are seeing a resurgence of Covid-19 cases which could dampen the rate of demand recovery for HPMT’s products given that Europe remains a key market.

To combat downside risk, the group’s management is focused on cost control as well as embarking on a digital transformation to adapt to the new normal.

HPMT is primarily involved in manufacturing and distribution of cutting tools, trading of third-party cutting tools, supporting equipment and accessories for metalworking as well as coating services. 

Meanwhile, HLIB Research found that HPMT’s orders had recovered to roughly 10% lower than its pre-pandemic baseline.

Orders on hand have expanded substantially to RM44 million from RM5.6 million during the peak of the lockdown as demand for HPMT’s cutting tools has been largely fuelled by resilience of smartphone and electronics end-markets. 

However, HPMT’s management sounded cautious about the outlook for the automobile and aerospace industries, with the latter facing uncertainties and near-term challenges.  

Nonetheless, HLIB Research said the stock offers cyclical exposure to an eventual economic recovery, thus warranting a revisit once a firmer recovery footing is established.

At 10.15am today, HPMT shares traded half a sen or 1.33% lower at 37 sen. The stock saw 76,500 shares transacted.

Since listing on the Main Market on Bursa Malaysia in June 2019, the stock's price has been trading below its initial public offering (IPO) price of 56 sen.

The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.






Related Stocks

BURSA 7.460
HPMT 0.325

Comments

Login to comment.