Results

FY03/14 core net profit of RM127m (+10%) beat expectations, exceeding our and consensus forecasts by 8.7% and 11.8% respectively.

Deviations

Better-than-expected FFB production.

Dividend

Declared single-tier DPS of 7 sen (ex date of 12 June 14 and payable on 1 Jul 2014), higher than our projected DPS of 6 sen.

Highlights

YTD… FY03/14 core net profit increased by 10% to RM127m, mainly on the back of narrowed losses for Indonesian operations (due to larger area under maturity and the operation of the newly commissioned palm oil mill), which more than offset higher plantation cost and lower average CPO selling price for Malaysian operations.

QoQ… Core net profit declined by 29.6% to RM34.4m mainly on the back of lower FFB output in Malaysia, which more than offset: (1) higher FFB output in Indonesia; and (2) higher palm product prices.

Risks

• Economic uncertainties in world’s major economies that may hurt demand and prices of edible oil (including palm oil); and
• Escalating CPO production cost.

Forecasts

Maintain for now, pending further update with management. Based on our sensitivity analysis, every RM100 rise in average CPO price will boost its earnings by 9%.

Rating

HOLD

Positives – (1) Strong FFB contribution from Indonesia; and (2) Strong balance sheet.

Negatives – (1) Demanding valuation; and (2) Low liquidity.

Valuation

We are maintaining our TP of RM3.40 (based on unchanged 17x FY03/15 EPS of 19.4 sen) as well as Hold recommendation on the stock for now, pending further update with management. While we like IJMP for its strong FFB output growth in the coming years and healthy balance sheet, we believe further upside to its share price will likely be capped by its pricey valuations.

Source: Hong Leong Investment Bank Research - 28 May 2014