Results

• 9MFY03/15 core net profit of RM107.3m (+15.9%) accounted for 80.1% and 79.9% of consensus and our fullyear forecasts, respectively. We consider the results within expectations, as we believe 4Q will come in lower on the back of seasonally weaker FFB production.

Deviations

• Largely in line.

Dividend

• -

Highlights

• YTD… 9MFY03/15 core net profit increased by 15.9% to RM107.3m mainly on the back of higher FFB output (from both Malaysian and Indonesian operations). Overall FFB production increased by 41.3% to 760.7k mt as: (1) more planted area in Indonesia operations attained maturity (which has in turn resulted in FFB contribution from Indonesia more than doubling to 270.3k mt); and (2) the recovery from the previous year’s palm stress, which has contributed to a 10.6% increase in FFB production in Malaysian estates.

• QoQ… Excluding unrealized exchange loss from its US$ borrowings (for its Indonesian operations), pretax profit in 3QFY03/15 rose by 12.6% to RM47.8m, thanks to higher realized palm product prices in Indonesia. However, core net profit increased by a lower quantum (of 3%) to RM36.2% and this was due mainly to a 7.2%-pts increase in effective tax rate.

Risks

• Weaker-than-expected FFB production and OER;
• A sharp increase in production cost; and
• A sharp decline in vegetable oil prices.

Forecasts

• Maintained.

Rating

HOLD

Positives

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

Negatives

• (1) Demanding valuation; and (2) Lowliquidity.

Valuation

Maintain TP of RM3.52 (based on unchanged 17x FY03/17 EPS of 20.7 sen) and HOLD recommendation. 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 - 2 Mar 2015