Period  FY14

Actual vs. Expectations IJM Plantation (IJMP)’s FY14 core net profit (CNP) of RM109m is within expectations as it made up 96% of consensus (RM114m) and 105% of our estimate (RM104m).

 Note that we have excluded forex loss of RM21m in our CNP estimate for FY14.

Dividends  As expected, a single tier dividend of 7.0 sen was announced with ex-date of 10-Jun-2014.

Key Results Highlights YoY, FY14 CNP slipped 15% to RM109m as CPO prices declined 9% to RM2385/mt. However, the decline is cushioned by FFB growth of 5% to 729,800 MT.

 QoQ, 4Q14 CNP declined 61% to RM19m due to seasonally lower FFB production of 191,374 mt (-9% QoQ). Additionally, we believe that its cost may have increased as more areas attained maturity in Kalimantan. Note that newly mature trees generally produce low FFB yield but its expenditure can no longer be capitalised in balance sheet.

Outlook  Management expects FY15 CNP to be satisfactory due to contribution from Kalimantan estates.

 However, we believe that 1,000 ha or 5% of IJMP’s Sabah plantation estate is due for replanting in FY15 and this should limit overall Group FFB growth at 9%.

Change to Forecasts Maintain FY15E CNP of RM204m while FY16E CNP is unchanged at RM206m.

Rating Downgrade to MARKET PERFORM

 The high FFB growth from its Indonesian maturing estates is neutralised by the requirements to start replanting in Sabah.

Valuation  Maintain our TP of RM3.80 based on unchanged Fwd. PER of 14.9x on FY15E EPS of 25.5 sen.

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

 Higher-than-expected planting cost.

Source: Kenanga