IJMP’s core net profit of RM65.7m in 1QFY22 (QoQ: +11.5%; YoY: +1311%) beat expectations, accounting for 44.5-44.6% of our and consensus full-year estimates, due mainly to higher-than-expected realised palm product prices. We maintain our core net profit forecasts for now (pending a sector-wide review on our CPO price assumptions post results season), TP of RM3.10 (in line with KLK’s takeover offer price), and HOLD rating on IJMP.

Beat expectations. 1QFY22 core net profit of RM65.7m (QoQ: +11.5%; YoY: +1311%) beat expectations, accounting for 44.5-44.6% of our and consensus full-year estimates, due mainly to higher-than-expected realised palm product prices.

Exceptional items (EIs) in 1QFY22. Core net profit of RM65.7m in 1QFY22 was arrived after adjusting for (i) RM3.8m net forex gain, (ii) RM0.5m fair value losses on CPO pricing and interest rate swaps, (iii) RM9m deferred tax arising from change in tax rate in Indonesia.

QoQ. Core net profit rose 11.5% to RM65.7m in 1QFY22, helped mainly by higher realised palm product prices. During the quarter, FFB production rose marginally (by 0.9%) to 245k mt, as yield recovery in Malaysia (+23.3%, due to seasonal factor) was offset by a 10.1% decline in FFB production in Indonesia.

YoY. Core net profit multiplied to RM65.7m (from RM4.7m a year ago), boosted mainly significantly higher realised palm product prices (but partly negated by a 10.7% decline in total FFB production, led mainly by a 22.7% decline in FFB production in Malaysia).

FFB production. FFB production declined by 8.3% to 325k mt during the first 4 months of FY22, dragged mainly by lower FFB production in Indonesia. We are keeping our marginal FFB output growth assumption 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. Maintain for now, pending a sector-wide review on our CPO price assumptions post results season (with upside bias).

Maintain HOLD rating with unchanged TP of RM3.10. We maintain our HOLD rating on IJMP, with an unchanged TP of RM3.10, in line with KLK’s takeover offer price.

Source: Hong Leong Investment Bank Research - 25 Aug 2021