Kenanga downgraded KAWAN to HOLD with TP of RM1.51

Kawan Food’s 1Q11 revenue YoY grew 11.4% to RM25.9m while net profit dropped 6.7% to RM3m, bringing in slightly below our estimates. 1Q11 revenue surged 18.9% QoQ due mainly to the improved sales
from the rest of Asia, North America and Malaysia. The group’s 1Q11 net profit has decreased by 16.4% QoQ, no thanks to the high effective rate and appreciation of Ringgit Malaysia. We maintain our target price of RM1.51 that derived by using FY11 EPS of 12.6 sen and five-year sector average PE band of 12x. We have downgraded our stock recommendation to HOLD due to the limited upside from current level.