Upgrade to BUY. PATAMI of RM37.6m (-32.1% YoY, +105.9% QoQ) was within our expectation. 1Q12's average raw material cost (USD480/ton, we estimate) was a carry-over of the same stock from 4Q12. These stocks have been consumed and Bernas will start using its new stocks which are procured at lower cost. We expect ASPs to remain constant (rice selling price rarely goes down) and this will help boost profit and profit margins in 2012. Amid improving prospects, we upgrade Bernas to a Buy (from Hold). The stock offers an attractive total return of 20% (11% capital return + 9% net dividend yield) to our DDM based target price of RM3.40/share.

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Source: Maybank Research - 28 May 2012