• Overview. IOI recorded a 46% increase in core PBT of RM501.6m in 4Q21 mainly due to higher contribution from plantation segment as margin increased to 58% from 47% in 4Q20 on higher ASP realised for CPO and PK, offsetting the lower FFB and CPO production recorded during the period. This also was aided by 58% increase in share of profit from associate with a share of profit of RM59.9m as oppose to RM37.8m in 4Q20. On qoq basis, 2% lower in core PBT was mainly due to lower contribution from resources-based manufacturing segment, mitigated by higher contribution from plantation segment – Table 2.
   
• Against estimates: Above. FY21 core earnings was above expectations at 119% of our full year forecast, on higher contribution from all segments. Plantation’s margin improved to 49% from 36% in FY20 on account of higher CPO and PK price realized, and higher share of associate results. As for RBM segment, the higher share of associate results from Loders, included a share of one-off gain of RM268.3m from the sale of its refinery located in Rotterdam and better performance from North America and Europe.
   
• Dividend. The Board has declared a second interim dividend of 6.0sen bringing its total DPS to-date to 10.5sen (FY20: 8.0sen) per ordinary share – translating into DY of 2.7%, on current market price.
   
• Key Highlights. On a separate announcement, the company had extended the revised timeframe for an additional period of 15 months to utilise the remaining proceeds received from the disposal of 70% of IOI’s equity interest held in Loders. This is to enable the Board to further identify and evaluate the feasibility of the potential investments and formulating its Group strategies holistically.
   
• Outlook. We believe RBM segment would continue to perform well despite potential margin squeeze on higher feedstock cost and subdued demand for refined palm products in the future. Conversely, the plantation segment is expected to continue to sustain its performance given better palm oil price anticipated in the coming quarter.
   
• Our call: Maintain BUY with unchanged TP of RM4.80 based on average 5-yr low P/B of 3.1x and BV/share of RM1.55.

Source: BIMB Securities Research - 25 Aug 2021