IJMP reported 9MFY19 core net loss of RM18.6m (vs. a core net profit of RM48.7m in 9MFY18), vs. consensus and our full-year forecasts of RM0.5m and RM5.2m, respectively. Key variances against our forecast came largely from lower-than-expected realised palm product prices and CPO sales volume. We revised our FY19 forecast to a core net loss of RM11.5m (from a core net profit of RM0.5m previously), to reflect lower realised palm product prices YTD. FY20- 21 core net profit forecasts were lowered by 9% and 1.6% respectively as w e tweaked our production cost assumptions. Maintain SELL rating with lower TP of RM1.04 (from RM1.15 previously) based on 22x revised FY03/20 EPS of 4.7 sen.

Missed expectations. IJMP reported 9MFY19 core net loss of RM18.6m (vs. a core net profit of RM48.7m in 9MFY18), vs. consensus and our full-year forecasts of RM0.5m and RM5.2m, respectively. Key variances against our forecast came largely from lower-than-expected realised palm product prices and CPO sales volume.

QoQ. Despite higher FFB production and CPO sales volume, 3QFY18 core net loss widened to RM22m (from RM9.7m in 2QFY19) mainly due to lower palm product prices and higher operating expenses.

YoY. 3QFY19 turned into a core net loss of RM22m (from core net profit of RM10.8m a year ago, mainly on lower palm product prices.

YTD. 9MFY19 turned into a core net loss of RM18.6m (from core net profit of RM48.7m last year), mainly on the back of lower palm product prices, lower FFB production and CPO sales (in particular, Malaysia operations, arising from adverse effect of earlier prolonged dry weather), and higher finance cost.

Forecasts. We revised our FY19 forecast to a core net loss of RM11.5m (from a core net profit of RM0.5m previously), to reflect lower realised palm product prices YTD. FY20-21 core net profit forecasts were lowered by 9% and 1.6% respectively as we tweaked our production cost assumptions.

Maintain SELL, with lower TP of RM1.04. Post downward earnings revision in our core net profit forecasts, we lower our TP on the stock by 9.6% to RM1.04 based on 22x FY20 EPS of 4.7 sen. We maintain our SELL rating on the stock, as valuation remains pricey following the recent share price appreciation and downward revision in our core net profit forecasts. At current share price of RM1.78, IJMP is trading at FY20 P/E of 37.6x.

Source: Hong Leong Investment Bank Research - 27 Feb 2019