CIMB downgrades Indofood Agri Resources (5JS.SG) to Neutral from Trading Buy on valuation grounds.

Still, it lifts target price to $3.24 from $3.17, based on 18x forward P/E, after increasing FY11-12 earnings estimates by 3% to account for higher rubber prices for unit London Sumatra (LSIP.JK) and lower taxes.

Says Indofood’s latest move to reduce its stake in London Sumatra to 59.5% from 64.4% will boost its balance sheet, with net gearing falling to 32% from 40%.

Shares were sold for $183.8 million. Stock off 0.4% at $2.88.