2QFY21 core net profit of RM32.5m took 1HFY21 core net profit to RM40.1m (vs. core net loss of -RM4.1m SPLY). The results beat expectations, accounting for 64.3-64.7% of consensus and our full-year estimates, due mainly to better-thanexpected realised palm product prices. We raise our FY03/21 core net profit by 30.8% to RM78.5m, mainly to account for higher realised palm product prices YTD. We maintain our FY03/22-23 core net profit forecasts for now, pending a review on our average CPO price assumptions. Based on our estimates, every RM100/mt change in our average CPO price assumption will result in our FY03/21-23 changing by ~20%. We maintain our HOLD rating on IJMP, with an unchanged TP of RM1.78 for now (based on unchanged 20x FY22 core EPS of 8.9 sen).

Beat expectations. 2QFY21 core net profit of RM32.5m (vs. core net profit of RM7.7m in 1QFY21 and core net loss of -RM2.9m in 2QFY20) took 1HFY21 core net profit to RM40.1m (vs. core net loss of -RM4.1m SPLY). The results beat expectations, accounting for 64.3-64.7% of consensus and our full-year estimates, due mainly to better-than-expected realised palm product prices.

Exceptional items (EIs). The core net profit of RM40.1m in 1HFY21 was arrived after adjusting for (i) RM44.3m unrealised forex translation gain (adjusted for tax), (ii) RM0.2m fair value loss on interest rate swaps, and (iii) RM3.1m fair value loss on CPO pricing swaps.

QoQ. Core net profit surged 3.2x to RM32.5m in 2QFY21, as lower FFB production (- 9.4%) and CPO sales volume were more than mitigated by higher realised palm product prices and PKO sales volume.

YoY. 2QFY21 returned to the back with a core net profit of RM32.5m (from core net loss of –RM2.9m a year ago), as higher realised palm product prices more than mitigated lower FFB output and CPO sales volume.

YTD. 1HFY21 performance turned around with a core net profit of RM40.1m (vs. core net loss of –RM4.1m SPLY), boosted mainly by higher FFB output, CPO sales volume and realised palm product prices.

FFB output. FFB output increased by 5.6% to 524.4k tonnes in 1HFY21, due to crop recovery in Malaysian operations and more planted areas moved to prime age bracket in Indonesian operations. Management is keeping to its FFB output growth guidance of ~5% in FY21. Output growth in FY21 will be driven by additional newly mature area (~300 ha) and higher yield in Indonesia, which will more than mitigate lower harvesting areas in Sabah (due to replanting activities) and slight decline in FFB output contribution from Lampung area (arising from dry weather condition).

Forecast. We raise our FY03/21 core net profit by 30.8% to RM78.5m, mainly to account for higher realised palm product prices YTD. We maintain our FY03/22-23 core net profit forecasts for now, pending a review on our average CPO price assumptions post results season. Based on our estimates, every RM100/mt change in our average CPO price assumption will result in our FY03/21-23 changing by ~20%.

Maintain HOLD rating; TP: RM1.78. We maintain our HOLD rating on IJMP, with an unchanged TP of RM1.78 for now (based on unchanged 20x FY22 core EPS of 8.9 sen). There is an upside bias to our TP, pending a post results season review on our average CPO price assumption.

Source: Hong Leong Investment Bank Research - 26 Nov 2020