• IJMP reported a net loss of RM36.3m in FY19 on lower ASP of palm products and higher costs in Malaysian and Indonesian operations

• Overall, the loss came in within our full year forecast.

• On quarterly basis, PBT was higher as revenue increased 15% to RM164.8m on higher sales volumes and ASP of CPO.

• Declared 2sen dividend per share, payable on 17 July 2019.

• We maintain our FY20 and FY21 earnings forecast of RM2m and RM5m respectively with an unchanged TP of RM1.47. Upgrade to HOLD.

FY19 earnings was in-line

IJMP reported a loss of RM36.3m against a profit of RM27.9m in FY18 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.

Quarter performance satisfactory

On quarterly basis, revenue and PBT increased 15% (+17% yoy) and >100% (>100% yoy) respectively to RM164.8m and RM16.7m mainly due to higher sales volume as well as ASP of palm products. Indonesian operations PBT increased more than 100% to RM127m on higher revenue and net foreign exchange gains on USD and Japanese Yen denominated borrowings.

Declared single-tier interim dividend of 2sen

A single tier interim dividend of 2sen was declared (FY18: 5sen), payable on 17 July 2019. At current market price, this would translate into DY of 1.1%.

No change in forecast, maintain TP of RM1.47

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, nonetheless, we believe that the earnings upside would be limited by higher cost of production and lower ASP of palm products moving forward. As such, no change in earnings forecast and maintain TP of RM1.47 based on 12-month EBITDA/share estimates of 13.4sen and P/EBITDA ratio of 11x. IJMP has fallen by 15% the past 3 months and has met our sell price target. We now upgrade to HOLD as we believe its share price has reached a bottom, from a valuation perspective.

Source: BIMB Securities Research - 30 May 2019