IJMP’s FY18 core net profit of RM69.4m (-35.9% yoy) came in slightly above our expectations. The variance was mainly due to the betterthan-expected profit margin. We maintain our FY19-20 core EPS forecasts. Our TP for IJMP has been raised to RM2.39, based on an unchanged 22x PER on our FY19E EPS (rolled forward from 2018E). We continue to expect earnings growth on higher FFB and CPO production and lower costs of production. Maintain HOLD.

FY18 PBT Declines on Higher Costs of Production

IJM Plantation (IJMP) reported a slightly lower FY18 revenue of RM747.2m (-0.9% yoy), mainly because of lower CPO and PKO ASPs that were partially offset by higher CPO and PKO sales volumes at its Indonesian operation. Revenue from Malaysia declined by 10.5% yoy to RM418.4m, while revenue from its Indonesian operation increased by 14.8% yoy to RM328.9m. IJMP’s own FFB production increased by 8.1% yoy to 932,950MT in FY18, while CPO ASPs for Malaysia and Indonesia were at RM2,639/MT (FY17: RM2,753/MT) and RM2,380/MT (FY17: RM2,589/MT), respectively. Meanwhile, the PKO ASPs for Malaysia and Indonesia were at RM4,812/MT (FY17: RM5,830/MT) and RM4,575/MT (FY17: 5,473/MT), respectively. The EBITDA margin contracted to 26.4% from 31.5% in FY17, attributable to lower CPO and PKO ASPs and higher costs of production. PBT declined by 54.1% yoy in FY18 to RM77.3m.

Core Net Profit Slightly Above Our Expectations

After excluding one-off items, IJMP’s core net profit in FY18 declined by 35.9% yoy to RM69.4m. This came in above our and consensus expectations, accounting for 107.5% and 148.7% of our respective forecasts. The variance to our forecast was mainly due to the better-thanexpected profit margin. IJMP has declared an interim DPS of 5 sen (FY16: 5 sen).

TP Raised to RM2.39, Maintain HOLD Rating

We leave our FY19-20 core EPS forecasts unchanged post the FY18 results. We expect future earnings to grow underpinned by higher FFB and CPO production as well as lower costs of production especially from its Indonesian operations. We raise our 12-month TP for IJMP to RM2.39, as we roll forward our valuation to FY19E and based on an unchanged 22x PER. We maintain our HOLD rating on the stock.

Source: Affin Hwang Research - 31 May 2018