IJMP’s core net profit of RM28.2mm in 3QFY20 (vs. core net losses of RM1.8m in 2QFY20 and RM23.9m SPLY) took 9MFY20 core net profit to RM21.4m (vs. a core net loss of RM18.6m in 9MFY19). The results beat expectations, accounting for 98.7-99.7% of consensus and our full-year estimates, due mainly lower-than expected finance cost. We raise our FY20-22 core net profit forecasts by75.2%, 26.5% and 31.2%, mainly to account for slightly lower CPO production cost and lower finance cost assumptions. Post upward revision to our core net profit forecasts, we upgrade our rating on IJMP to BUY (from Hold earlier), with a higher TP of RM2.61 (from RM1.99 earlier) based on 25x revised FY22 EPS of 10.4 sen.

Beat expectations. 3QFY20 core net profit of RM28.2mm (vs. core net losses of RM1.8m in 2QFY20 and RM23.9m SPLY) took 9MFY20 core net profit to RM21.4m (vs. a core net loss of RM18.6m in 9MFY19). The results beat expectations, accounting for 98.7-99.7% of consensus and our full-year estimates, due mainly lower-than-expected finance cost.

Exceptional items (EIs). During the quarter, we adjusted for RM8.1m worth of EIs, which relates mainly to RM10.7m net forex gain, RM2.7m on the forex finance cost (arising from translations), and RM24.4m loss on fair value swap on CPO pricing swap.

QoQ. 3QFY20 performance turned around, with a core net profit of RM28.2m (from a core net loss of RM1.8m in 2QFY20), due mainly to higher sales volume for palm products in Malaysia and improved palm product prices (in both Malaysia and Indonesia).

YoY. 3QFY20 performance turned around, with a core net profit of RM 28.2m (from a core net loss of RM23.9m SPLY) due mainly to higher sales volume for palm products in Malaysia and improved palm product prices (in both Malaysia and Indonesia).

YTD. 9MFY20 returned into black, with a core net profit of RM21.4m (from a core net loss of RM18.6 in 9MFY19) due mainly to higher palm product sales volume (in both Malaysia and Indonesia), higher palm product prices in Indonesia and lower finance cost, which altogether more than offset lower palm product prices in Malaysia.

FFB production. FFB production grew 11% to 727k tonnes in 9MFY20, helped mainly by crop recovery in Malaysian estates, and the shift in cropping pattern in Indonesian estates during 3QFY20. For the full-year, we are projecting FFB production growth of 7.2%.

Forecast. We raise FY20-22 core net profit forecasts by 75.2%, 26.5% and 31.2%, mainly to account for slightly lower CPO production cost and lower finance cost assumptions.

Upgrade to BUY, with higher TP of RM2.61. Post upward revision to our core net profit forecasts, we upgrade our rating on IJMP to BUY (from Hold earlier), with a higher TP of RM2.61 (from RM1.99 earlier) based on 25x revised FY22 EPS of 10.4 sen.

Source: Hong Leong Investment Bank Research - 26 Feb 2020