• IJMP’s FY18 core earnings of RM69.4m was 36% lower than that of FY17 due to lower ASP of palm products, higher costs, as well as additional depreciation and overheads associated with the commencement of the second palm oil mill in Indonesia.

• Overall, it came above our expectations, accounting for 122% of our full year forecast.

• In line with industry trend, quarterly performance was impacted by lower sales volumes and ASP of palm products; which resulted in a 94% qoq decline in PBT.

• Declared 5sen dividend per share, payable on 18 July 2018.

• We revised lower our FY19 earnings forecast to RM94m with new TP of RM2.14 (RM2.46 previously). Maintain HOLD.

FY18 core earnings above estimate

IJMP reported a lower core profit of RM69.4m against RM108m in FY17 as margin was squeezed by 1) lower ASP realised for palm products, and 2) higher costs from replanting activities, minimum wage, and harvesting rate revision in Malaysian operation. This was also compounded by higher plantation maintenance costs and overheads in Indonesia operations as increased young mature area as well as additional depreciation associated with the commencement of the second palm oil mill.

Impacted by lower ASP and sales volume

On quarterly basis, revenue and PBT fell 37% (-27% yoy) and 94% (- 95% yoy) respectively to RM141.3m and RM1.9m mainly due to lower sales volume as well as ASP of palm products. Higher unrealised forex loss of RM10.8m on USD denominated borrowings (3Q18: RM3.55m losses) and lower gains on CPO swap contracts of RM0.2m (3Q18: RM3.1m losses) also aided to the lower results.

Declared single-tier interim dividend of 5sen

A single tier interim dividend of 5sen was declared (FY17: 7sen), payable on 18 July 2018. At current market price, this would translate into DY of 2.1%.

Change in forecast, maintain HOLD

Although we estimate that FFB production to increase significantly in the future due to large area of its young estates in Indonesia attaining maturity and high yielding age bracket, we believe that the earnings upside would be limited by higher cost of production and lower ASP of palm products moving forward. As such, we tweaked our FY19 earning forecast lower to RM94m from RM108m previously as we adjusted our production, costs and ASP products assumptions. Maintain HOLD with new TP of RM2.14 (RM2.46 previously), based on FY19 EPS and PER of 20x.

Source: BIMB Securities Research - 31 May 2018