Period  2Q15/1H15

Actual vs. Expectations IJM Plantation (IJMP)’s 1H15 core net profit (CNP) of RM77.8m is above consensus expectation but within ours. Note that it makes up 58% of consensus (RM133.4m) and 48% of our estimate (RM161.7m).

 Although the average realised CPO price of RM2,383/MT was below our expected price of RM2,500/MT, this was offset by IJMP’s 1H15 FFB growth at 41% which is much stronger than our expected FFB growth at 11%.

Dividends  None as expected.

Key Results Highlights YoY, 1H15 CNP grew 87% to RM77.8m mainly on strong FFB growth of 41% to 461,029 MT as well as CPO price improvement of 6% to RM2,383/MT.

 QoQ, 2Q15 CNP declined 22% on CPO prices falling 13% to RM2,241/MT. The seasonally higher FFB growth (+13% to 244,738 MT) was not enough to cover lower CPO price impact on earnings.

Outlook  Despite the good 1H15 earnings growth, we are concerned about the recent CPO price trends due to global trends of strengthening US dollar and low crude oil prices. Hence, we are looking to revise CPO price down soon, which will drag FY16E earnings.

Change to Forecasts Maintain FY15E CNP of RM162m. Although we have trimmed down our CPO price assumption by 4% to RM2400/MT (from RM2500/MT), we have also increased our FFB growth assumption to 21% (from 11% previously). Note that earnings sensitivity from CPO price is usually much higher than FFB growth. FY16E earning is Under Review at this juncture pending CPO price revision. Our last estimate for FY16E CPO prices is RM2500/MT and we are likely to reduce it.

Rating Maintain MARKET PERFORM

 Although we are likely to trim our TP lower we are likely to maintain MP rating on IJMP due to its double digit FFB growth prospects.

Valuation  Our TP is UNDER REVIEW as our FY16E EPS is under review. Our last TP of RM3.50 is based on 17.3x PE on FY15E EPS.

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

 Lower-than-expected FFB growth.

Source: Kenanga