Journey to Wealth
IJM Plantations - Slow recovery from tree stress
Period 2Q13 and 6M13
Actual vs. Expectations IJMP's 6M13 core net profit of RM69m* came in below both consensus and our estimates. It made up 45% of the consensus' FY13 forecast of RM153m and 41% of our forecast of RM167m.
6M13 FFB production was below expectation as the FFB volume of 285,996 mt made up only 43% of our FY13E estimate of 668,073 mt. This could be possibly due to the trees' slower than expected recovery from stress in the Sabah estates. Note that IJMP's oil palm trees in Sabah are generally mature with an estimated age of ~14 years old. That said, the overall group's age profile is still healthy at ~8.5 years old.
Dividends No dividend was announced as expected.
Key Results Highlights YoY, the 6M13 core net profit declined by 28% to RM69m as the FFB volume tumbled 23% to 285,996 mt and the average CPO price flat at RM3,024/mt (-1%). Cost of production is estimated to have increased by 10% due to higher wage and fertiliser costs.
QoQ, the 2Q13 core net profit jumped 48% to RM41m as the impact of the FFB volume jump (+48% to 170,766 mt) outpaced that of lower CPO prices (-9% to RM2,903/mt).
Outlook FY13E core net profit is poised to decline more than 20% YoY due to the expected lower CPO price of RM2850/mt (-7% YoY), lower FFB production of 645,176 mt (-4% YoY) and possibly higher cost of production by at least 10%.
Change to Forecasts Slash FY13E-FY14E core net profits by 19%-12% to RM135m-RM157m after assuming lower avg. CPO price of RM2850/mt (from RM3000/mt) for both years. FY13E-FY14E FFB yield has been lowered by 3%-1% to 20.5mt/ha-18.2mt/ha.
Rating Downgrade to UNDERPERFORM
Expected consensus earnings downgrade and possibility of another disappointment in 3Q13 result should pressure share price. So far, avg.
CPO price has been weak so far at RM2266/mt (-21% lower QoQ).
Valuation Cut our TP to RM2.70 (from RM3.35 previously) based on an unchanged Fwd. PER of 16.0x to the lower FY13E EPS of 16.8 sen (from 20.9 sen).
Risks Better than expected CPO prices.
Source: Kenanga
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
