IJMP’s FY18 core net profit of RM69.4m (-36.7%) beat our expectation, exceeding our forecast by 10.7%, mainly on the back of lower-than-expected effective tax rate. Against the consensus, the results came inline. Declared interim DPS of 5 sen. Despite the better-than-expected set of performance, we are leaving our FY19-20 net profit forecasts unchanged, as we are keeping the view that effective tax rate will remain high in the near-term (due to forex fluctuation). Maintain HOLD with unchanged TP of RM2.06 based on unchanged 20x FY03/20 core EPS of 10.3 sen.

Better-than-expected. 4QFY18 core net profit of RM20.7m (qoq: -34.2%; yoy: +29.1%) took FY18 core net profit to RM69.4m (-36.7%). The results came in within market expectations but beat our expectation (exceeding our forecast by 10.7%). Key variance against our forecast came largely from lower-than-expected effective tax rate of 33% (vs. 40% we assumed).

Dividend. Declared interim DPS of 5 sen (ex-date: 27 Jun 18, payment date: 29 Jun 18).

QoQ. 4QFY18 core net profit declined by 34.2% to RM20.7m mainly on the back of lower realised palm product prices, seasonally weaker FFB production and higher depreciation charges (arising from the adoption of MFRS 116 and 141, effective 1 Jan 18).

YoY. Despite revenue declining by 26.6% to RM141.3m (mainly on the back of lower CPO sales and palm product prices), 4QFY18 core net profit increased by 29.1% to RM20.7m, as lower CPO sales and palm product prices, as well as higher depreciation charges (arising from the adoption of MFRS 116 and 141) were more than mitigated by tax write-back in 4QFY18.

YTD. FY03/18 core net profit declined by 36.7% to RM69.4m, mainly on the back of lower CPO sales (in particularly, its Malaysian operations arising from lagged impact of prolonged dry weather in 2015-16), lower realised palm product prices, higher production cost, higher finance cost and higher depreciation charges (arising from the adoption of MFRS 116 and 141, effective 1 Jan 18).

Forecast. Despite the better-than-expected set of performance, we leave our FY19- 20 net profit forecasts unchanged, as we are keeping the view that effective tax rate will remain high in the near-term (due to forex fluctuation).

Maintain HOLD, TP: RM2.06. Maintain HOLD recommendation, and TP of RM2.06 based on unchanged 20x FY03/20 core EPS of 10.3 sen.

Source: Hong Leong Investment Bank Research - 31 May 2018