Maintain Neutral But Stock Is Trading Higher Than Target Price

Since I have commented on the UNFAIR but REASONABLE advise dished out by Independent Advisors, I feel I should also point out another type of wonderful advice from our stock market research houses.

This was published on theEdgeMalaysia.com: http://www.theedgemalaysia.com/business-news/236588-venturing-into-biodiesel.html

• Venturing into biodiesel  
  Business & Markets 2013
  Written by theedgemalaysia.com   
  Monday, 22 April 2013 10:49
  
  Felda Global Ventures
  Holdings Bhd
  (April 19, RM4.60)
  Maintain neutral at RM4.60 with a target price of RM4.32: We are overall “neutral” on FGV’s acquisition of a 100,000-tonne biodiesel plant in Malaysia. This will allow the group to expand its product offerings to include biodiesel. However, this is offset by our concern over the historical losses reported by the business.
  
  We expect FGV to turn around this business given the potential synergy to be derived from this asset with its existing businesses. In view of this, we expect this acquisition to have a minimal impact on the group’s future earnings. We maintain our “neutral” call with an unchanged sum of parts-based target price of RM4.32.
  
  FGV has signed an agreement with Mission Biotechnologies Sdn Bhd to acquire a 100,000-tonne per annum biodiesel refinery at Kuantan Port, Pahang for US$11.5 million (RM34.9 million).
  
  The biodiesel plant is located on six acres (2.4ha) of prime land and has a 16,000-tonne storage tank connected to a deep water jetty via import and export pipelines. The plant is expected to be fully operational by July 1.
  
  This new development is in line with the group’s strategy to venture further into downstream operations. The plant is located close to FGV’s estates in Pahang as well as the group’s refinery and oleochemical plant. This will allow the group to integrate this plant into its existing operations more efficiently and save on transport costs.
  
  The acquisition will also allow FGV to channel its high free fatty acids (or lower quality) CPO for biodiesel production and achieve better pricing for its palm products. The acquisition price for the asset looks fair to us as it is below RM100 million, which was the price quoted for building a biodiesel plant in 2006.
  
  However, FGV’s acquisition is most costly compared with Genting PLANTATION []s Bhd’s acquisition of a 200,000-tonne biodiesel plant in Lahad Datu for US$13.3 million in 2011.
  
  The potential synergy to be derived is offset by the historical pre-tax losses chalked up by the biodiesel business of A$4.5 million (RM14.04 million) to A$5 million in 2011 financial year (FY11) and FY12.
  
  We expect FGV to turn around the business through improved utilisation rates and better procurement of raw materials. Overall, the earnings impact from this is projected to be minimal. Maintain “neutral”. — CIMB Research, April 19
  
  
  
  This article first appeared in The Edge Financial Daily, on April 22, 2013.

Well what's wrong with this 'neutral' recommendation?

The stock is trading at 4.60 but the research house's target price is 4.32.Which means the stock is worth more than the target price set!

Yet the research house recommendation is a NEUTRAL.

Duh!

If the stock is trading more than the target price, shouldn't the recommendation be a simple SELL?