IJMP’s core net loss of RM2.3m in 2QFY20 (vs. core net losses of RM4.9m in 1QFY20 and RM8.7m 2QFY18) took 1HFY20 core net loss to RM7.3m, vs. consensus and our full-year projected core net profits of RM20.3m and RM34.7m. While we anticipate 2H to come in much stronger (underpinned by a strong recovery in palm product prices since Oct-19), the results still missed our expectation, on the back of lower-than-expected realised palm product prices. We lower our FY20 core net profit forecast by 22% to RM27m, largely to account for the lower-than-expected realised CPO price in 1HFY20. We maintain our FY21-22 core net profit forecasts, based on average CPO price assumption of RM2,400/tonne. We maintain our HOLD rating on IJMP, with an unchanged TP of RM1.63 based on 25x FY21 EPS of 6.5 sen. At RM1.78, we believe improved earnings prospects (arising from higher palm product prices) has already been reflected in recent share price run-up (which has appreciated by 16.3% since early Nov-19).

Missed our expectation. 2QFY20 core net loss of RM2.3m (vs. core net losses of RM4.9m in 1QFY20 and RM8.7m in 2QFY19) took 1HFY20 core net loss to RM7.3m, vs. consensus and our full-year projected core net profits of RM20.3m and RM34.7m, respectively. While we anticipate 2H to come in much stronger (underpinned by a strong recovery in palm product prices since Oct-19), the results still missed our expectation, on the back of lower-than-expected realised palm product prices.

QoQ. 2QFY20 core net loss narrowed to RM2.3m (from RM4.9m in previous quarter), mainly on the back of higher sales volume (for both CPO and PK), which more than mitigated lower realised palm product prices in Indonesia.

YoY. 2QFY20 core net loss narrowed to RM2.3m (from RM8.7m a year ago), mainly on the back of higher sales volume (for both CPO and PK), which more than offset significantly lower palm product prices.

YTD. 1HFY20 performance reversed to a core net loss of RM7.3m (from a core net profit of RM5.4m in 1HFY19), dragged mainly by significantly lower palm product prices.

FFB production. FFB production grew 10.6% to 497k tonnes in 1HFY20, helped mainly by crop production recovery in Malaysian operations, which more than mitigated lower FFB production in Indonesian operations. For the full-year, we are projecting FFB production growth of 2.7%, underpinned by crop recovery in Malaysia and young age profile in Indonesia).

Forecast. We lower our FY20 core net profit forecast by 22% to RM27m, largely to account for the lower-than-expected realised CPO price in 1HFY20. We maintain our FY21-22 core net profit forecasts, based on average CPO price assumption of RM2,400/tonne.

Maintain HOLD, with unchanged TP of RM1.63. We maintain our HOLD rating on IJMP, with an unchanged TP of RM1.63 based on 25x FY21 EPS of 6.5 sen. At RM1.78, IJMP is trading at FY20-21 P/E of 58x and 27.3x respectively, and we believe improved earnings prospects (arising from higher palm product prices) has already been reflected in recent share price run-up (which has appreciated by 16.3% since early Nov-19).

Source: Hong Leong Investment Bank Research - 3 Dec 2019