Investment Highlights

• We would be dropping coverage of IJM Plantations (IJMP) going forward as trading of its shares will be suspended on 26 November 2021. KL Kepong (KLK) owns about 94.9% of IJMP currently.

• On an annualised basis, IJMP’s 1HFY22 core net profit (exunrealised forex gains of RM11.5mil) exceeded consensus estimates by 65%. The discrepancies between the actual results and consensus estimates were due to a lower-than-estimated effective tax rate and better-than-anticipated gross profit margin. IJMP’s effective tax rate was 23.1% in 1HFY22 vs. our forecast of 27% due to the utilisation of tax losses in Indonesia.

• IJMP’s core net profit surged to RM149.6mil in 1HFY22 from a mere RM24.3mil in 1HFY21 on the back of robust palm product prices. EBIT margin expanded to 36.8% in 1HFY21 from 15.8% in 1HFY20.

• Average CPO price in Malaysia increased by 63.0% to RM4,100/tonne in 1HFY22 from RM2,516/tonne in 1HFY21. Average CPO price in Indonesia climbed to RM3,173/tonne in 1HFY22 from RM2,177/tonne in 1HFY21.

• The average price disparity between CPO in Malaysia and Indonesia widened to RM927/tonne in 1HFY22 from RM339/tonne in 1HFY21. We attribute this to the hike in Indonesia’s CPO export tax and levy. Comparing 2QFY22 against 1QFY22 however, the average price difference narrowed to RM881/tonne from RM955/tonne as Indonesia reduced the CPO export tax and levy in July 2021.

• In its announcement to Bursa Malaysia, IJMP said that Indonesia’s CPO export tax and levy had affected its revenue by RM90.5mil in 1HFY22 vs. 1HFY21. Comparing 2QFY22 against 2QFY21, Indonesia’s CPO export tax and levy had reduced IJMP’s revenue by RM36.1mil.

• IJMP’s FFB production edged down by 1.6% YoY in 1HFY22. In Indonesia, IJMP’s FFB output improved by 10.6% YoY in 1HFY22. However in Malaysia, FFB production plunged by 14.0%. Indonesia accounted for 56.7% of IJMP’s FFB production in 1HFY22 compared with 50.4% in 1HFY21.

Source: AmInvest Research - 22 Nov 2021