- We reiterate BUY on IJM Plantations Bhd (IJMP) with an unchanged fair value of RM3.25/share. Our fair value is roughly based on a PE of 18.5x on IJMP’s FY15F basic EPS.

- IJMP’s FY13 results were within our forecast and consensus estimates. The group reported a 29% YoY decline in net profit in FY13 on the back of a 17.6% fall in turnover. We have tweaked IJMP’s FY14F earnings forecast downwards for housekeeping reasons.

- IJMP has declared a gross DPS of 7 sen for FY13 (FY12: 10 sen), which translates into a yield of 2.3%. Payment date of the gross dividend is 3 July 2013.

- IJMP’s EBIT margin slid from 38.5% in FY12 to 32.8% in FY13 dragged by lower selling prices and higher production costs.

- FFB production in Malaysia shrank 1.9% from 648,853 tonnes in FY12 to 636,631 tonnes in FY13. IJMP’s FFB production in Malaysia in 2HFY13 accounted for 58% of group output for the full financial year.

- Recall that the group’s FFB output in 1HFY13 was affected by lag effect of the drought, which took place in early-2010. Subsequently, FFB yields recovered in 2HFY13, leading to higher production.

- IJMP realised an average CPO price of RM2,620/tonne in FY13, which was 14.1% lower than the average price of RM3,049/tonne recorded in FY12. In 4QFY13, the group’s average CPO price realised was RM2,286/tonne against RM2,277/tonne in 3QFY13.

- IJMP’s average CPO price realised of RM2,620/tonne was marginally higher than MPOB’s (Malaysian Palm Oil Board)spot price of RM2,606/tonne for Sabah in FY13.

- IJMP’s plantation division in Indonesia accounted for 8% of group FFB production in FY13. FFB output in Indonesia climbed 152.9% from 21,979 tonnes in FY12 to 55,579tonnes in FY13.

- The Indonesian plantation division recorded a pre-tax loss of RM11.8mil in FY13 compared with a positive RM2mil in FY12.

- IJMP is expected to record a FFB production of more than 100,000 tonnes in Indonesia in FY14F, almost doubling that of FY13’s 55,579 tonnes. The expansion in FFB output is envisaged to be driven by an increase in mature areas.

Source: AmeSecurities