Journey to Wealth
IJM Plantations - 9M13 above expectation
Period 3Q13/9M13
Actual vs. Expectations 9M13 core net profit* of RM105m makes up 84% of consensus forecast and this is below consensus expectations of RM125m. It is also better than our expectation at 107% of our forecast of RM98m.
9M13 core net profit was also better than our expectation as it made up 107% of our estimate of RM98m. We may have overestimated the cost of production as its 9M13 operating expenses actually declined 12% YoY to RM232m. We think the Group may have achieved better economy of scale as its Kalimantan estates matures.
Dividends As expected, no dividend was announced.
Key Results Highlights YoY, 9M13 core net profit* declined 32% to RM105m as CPO prices was down 9% to RM2749/mt. FFB volume was also lower at 514k mt (-6%).
QoQ, 3Q13 core net profit* declined 12% to RM36m as CPO prices was down 22% to RM2277/mt. Significantly higher FFB volume at 228k mt (+34%) mitigated the earnings fall.
Outlook Short-term outlook remains negative due to low CPO prices.
Change to Forecasts Increase FY13E-FY14E core earnings by 14%-3% to RM112m-RM144m. We have reduced our FY13E-FY14E CPO cost assumption by 6%-2% to RM1259-RM1277 after assuming lower fertilizer cost and labor costs.
Rating Maintain UNDERPERFORM
Despite our earnings upgrade, we still expect IJMP FY13E core earnings to decline 36% to RM112m due to low CPO prices.
Valuation Increase our TP to RM2.75 (from RM2.60 previously) based on an unchanged Fwd. PER of 16.2x to the higher CY13E EPS of 16.9 sen (from 16.1 sen).
Risks Better than expected CPO prices.
Source: Kenanga
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