Period  3Q14/9M14

Actual vs. Expectations IJM Plantation (IJMP)’s 9M14 core net profit (CNP) of RM90m is above expectations as it already made up 89% of consensus (RM101m) and 100% of our estimate (RM90m) for FY14. We believe that IJMP may have improved its efficiency in managing cost during the low CPO prices period.

 Note that we have excluded forex loss of RM54m in our core NP estimate for 9M14.

Dividends  As expected, no dividend was announced.

Key Results Highlights YoY, 9M14 CNP declined 14% to RM90m as CPO prices declined 16% to RM2312/mt. However, things are picking up as 3Q14 CNP has improved 35% YoY to RM49m and we think this trend is likely to be sustained into 4Q14 as CPO prices has recovered to above RM2700/MT.

 QoQ, 3Q14 CNP jumped 52% to RM49m due to better CPO prices (+6% to RM2416/MT) and seasonally higher FFB production of 210,772 mt (+17% QoQ).

Outlook  The strong 3Q14 CNP is a strong sign that the 1H14’s issue of old CPO inventory is now fully resolved. While FY14 CNP is expected to be lower YoY, we believe that FY15 would be a much better year due to our bullish view on CPO prices.

Change to Forecasts FY14E CNP is increased by 16% to RM104m while FY15E CNP is increased by 5% to RM204m. We have assumed lower cost of production which we think should come from more efficient use of fertilizer and other costs efficiency practised by the management.

Rating Upgrade to OUTPERFORM

 We believe that investor should buy IJMP to position for strong earnings growth expected in FY15E.

Valuation  We have increased our TP to RM3.80 based on unchanged Fwd. PER of 14.9x on higher FY15E EPS of 25.4 sen (from 24.3 sen).

Risks to Our Call Lower-than-expected CPO prices.

 Higher-than-expected planting cost.

Source: Kenanga