IJMP’s core net profit of RM155.1m (+135.7%) beat expectations, accounting for 139.2-148.9% of consensus and our full-year estimates, due mainly to lower-than expected CPO production cost and finance cost. Declared interim DPS of 10 sen (ex-date: 13 Jul 2021). We raise our FY22-23 core net profit forecasts by 11-13%, largely to account for lower CPO production cost assumptions. Post earnings revision, we maintain our BUY rating on IJMP, with a higher TP of RM2.61 (vs. RM2.31 earlier) based on 18x revised FY23 core EPS of 14.5 sen.

Beat expectations. 4QFY21 core net profit of RM62.4m (QoQ: +39.2%; YoY: +35.2%) took FY21 sum to RM155.1m (+135.7%). The results beat expectations, accounting for 139.2-148.9% of consensus and our full-year estimates, due mainly to lower-than expected CPO production cost and finance cost.

Exceptional items (EIs) in FY21. Core net profit of RM155.1m in FY21 was arrived after adjusting for (i) RM82.4m forex gains, (ii) RM12.5m fair value losses on CPO swaps, (iii) RM0.3m fair value gain on interest rate swap, and (iv) RM20.2m deferred tax arising from change in tax rate in Indonesia.

Dividend. Declared interim DPS of 10 sen (ex-date: 13 Jul 2021).

QoQ. Core net profit jumped 39.2% to RM62.4m in 4QFY21, boosted mainly by higher realised palm product prices, and higher CPO sales volume in Indonesia (but partly weighed down by lower CPO sales volume in Malaysia).

YoY. Core net profit increased by 35.2% to RM62.4m in 4QFY21, boosted mainly by higher realised palm product prices (but partly offset by lower CPO sales volume in Malaysia).

FFB output. FFB output rose marginally (by 0.3%) to 1.06m tonnes in FY21 (contributed by output growth of 0.2% in Malaysia operations and 0.3% in Indonesia operations). We are projecting a marginal FFB output growth of 3.2% in FY22, as FFB output contribution from newly mature area (estimated 1,000-1,200 ha) will be offset by more aggressive replanting activities in Sabah (2,000-2,500 ha in FY22 vs. 1,000-1,200 ha in FY21). Forecast. We raise our FY22-23 core net profit forecasts by 11-13%, largely to account for lower CPO production cost assumptions.

Maintain BUY rating with higher TP of RM2.61. Following the upward revision in our core net profit forecasts, we maintain our BUY rating on IJMP, with a higher TP of RM2.61 (vs. RM2.31 earlier) based on 18x revised FY23 core EPS of 14.5 sen. We continue to like IJMP for its improving earnings prospects, young age profile (average age of 15 years for Malaysian estates and 9 years for Indonesian estates), commendable valuation, and prudent management. At RM1.88, IJMP is trading at FY22-23 P/E of 10.1x and 13.0x, respectively.

Source: Hong Leong Investment Bank Research - 28 May 2021