IJMP’s 12MFY20 core net profit of RM44.3m (vs. 12MFY19 core net loss of RM18.1m) came in above our expectations, mainly due to better-than-expected palm-oil product margins. We raise our FY21/22E core EPS by 72%/23%, mainly to take into account higher FFB and CPO production volumes and lower production costs assumptions. As such, our DCF-derived TP is now higher at RM1.95 (from RM1.90) and we upgrade IJMP to a BUY given the potential upside of 17.5% to our new TP. We expect earnings to grow in FY22E onwards on the back of higher FFB and CPO production and ASPs after a lacklustre FY21E (due to weak CPO prices).

4QFY20 PBT Impacted by Forex Losses

IJM Plantations (IJMP) 4QFY20 revenue declined by 17.8% qoq to RM195.4m, mainly due to lower sales volume of both CPO and PKO but partially mitigated by higher selling prices. The total sales volumes of CPO and PKO in 4QFY20 declined by 21.2% and 14% qoq, respectively, to 61.8k MT and 5.4k MT, attributable to lower production for the quarter. Meanwhile, IJMP’s CPO ASPs for Malaysia and Indonesia stood at RM2,767/MT (3QFY20: RM2,437/MT) and RM2,335/MT (3QFY20: RM2,160/MT), respectively, while PKO ASPs for Malaysia and Indonesia were at RM3,233/MT (3QFY20: RM2,819/MT) and RM2,561/MT (3QFY20: 1,901/MT), respectively. IJMP posted a LBT of RM73.4m in 4QFY20 vs. a PBT of RM33.3m in 3QFY20 – losses from Indonesian operations (due to forex losses) were partially offset by higher profit from Malaysian operations. After excluding one-off items, IJMP’s core net profit in 4QFY20 declined by 27.6% qoq to RM22.4m. IJMP declared an interim DPS of 2 sen, bringing total 12MFY20 DPS to 2 sen (12MFY19: 2 sen).

12MFY20 Revenue Was Up Due to Higher CPO ASP and Sales Volumes

For 12MFY20, IJMP reported an increase in revenue to RM739.1m, up by 17.2% yoy, mainly due to higher contributions from both its Malaysian and Indonesian operations. For 12MFY20, CPO ASPs for Malaysia and Indonesia stood at RM2,269/MT (12MFY19: RM2,125/MT) and RM2,052/MT (12MFY19: RM1,846/MT), respectively, while PKO ASPs for Malaysia and Indonesia were at RM2,668/MT (12MFY19: RM3,168/MT) and RM2,121/MT (12MFY19: 2,712/MT), respectively.

Source: Affin Hwang Research - 29 Jun 2020