We  are  maintaining  our  Buy  call  on  IJM  Plantations  but  lower  our  FV  to  RM3.63, which  still  offers  a  decent  potential  upside.  We  are  paring  down  our  forecasts despite  the  stronger  recovery  in  the group's production,  almost  all  of  which  is attributed  to  its  Sabah  unit.  The  stock  is  inexpensive  at  around  USD17k  per planted hectare and a PE of 12.6x FY14. 
 
Sharp  q-o-q  improvement.  IJMP's core  earnings  in  the  September  quarter  surged 37.4% q-o-q on the back of a 48.2% rise in FFB production, although this was offset by a 9.1%  decline  in  realized  CPO  price.  This  brought  its  1H  core  earnings  to  RM66.0m, which missed our expectation of full-year earnings of RM204.7m.

Shortfall  narrows.  The  much  stronger  September  quarter  performance  helped  to narrow  the  deficit  against  our  forecast  but  is  still  insufficient.  We  expect  the  quarter ended  December  to  be  stronger  in  terms  of  production,  which  should  partially  mitigate reducing our FY14 to RM189.2m.  

FV  lowered.  In  view  of  the  lower  profit  forecasts,  we  are  adjusting  our  FV  to  RM3.63, which is based on 16x CY13 earnings. We  find IJMP still offering a decent upside from the current price level and hence maintain our Buy call.

Source: OSK