FY20 CNP of RM34.8m is below our estimate (93%) but within consensus (97%), while the FFB output of 1.06m MT (+9% YoY) is within at 103%. We expect the boost in 1QFY21 FFB output (QTD: +10% QoQ) to be relatively neutralized by lower CPO prices (QTD: - 15% QoQ). Management’s FY21E FFB growth (+5%) isconsistentwith our forecast (+5.2%). Cut FY21E CNP by 22% on lower CPO price forecast and introduce FY22E CNP of RM65.0m. Downgrade to MARKET PERFORM but with a higher TP of RM1.60 (from RM1.55) based on a rolled over FY21E PBV of 1.15x (close to -0.5SD).

Missed our expectations. 4QFY20 registered CNP of RM13.0m, bringing FY20 CNP to RM34.8m, which is below our estimate at 93%, but within consensus’ estimate at 97%. Note that we have excluded forex losses amounting to RM100.7m among others to arrive at our 4QFY20 CNP. FY20 FFB output of 1.06m MT (+9% YoY) came within our estimate of 1.03m MT, at 103%. The DPS of 2.0 sen was spot on.

4QFY20 dragged by lower output. YoY, FY20 recorded CNP of RM34.8m (vs. CNL of RM18.1m in FY19) on the back of: (i) higher average CPO price (+9%), and (ii) higher FFB output (+9%). QoQ, despite higher CPO price (+10%), 4QFY20 CNP dived (-58%) as lower FFB output (-18%) overshadowed the impact of higher CPO prices.

Lower CPO price should offset recovery in FFB output for 1QFY21. Despite an expected recovery in FFB output (QTD: +10% QoQ), we believe the boost from higher output to be relatively neutralized by lower CPO prices (MPOB QTD: -15% QoQ). During the results briefing, management guided FY21E FFB growth of 5%, which is consistent with our expectation (FY21E FFB growth: +5.2%). While the risk of slower production from Indonesia remains as the country has yet to see a steep decline in output after the dry weather in 3QCY19, we are not overly concerned as the group’s young average tree age profile in Indonesia (7.9 years) should anchor the growth trajectory.

Cut FY21E CNP by 22% on lower CY20-21 CPO price forecast (RM,2300- RM2,400/MT) and introduce FY22E CNP of RM65.0m on FY22E FFB growth of 4%.

Fairly valued; Downgrade to MARKET PERFORM but with a higher Target Price of RM1.60 (from RM1.55) based on a rolled over FY21E PBV of 1.15x (close to -0.5SD) applied on FY21E BV/share of RM1.39. At current price, IJMPLNT is trading at FY21E PBV of 1.2x (33% premium to peers). While the premium can be justified by its younger average tree age profile of 10.4 years which enabled the group to record a 9% growth in FY20 FFB (vs. peers’ flat to low single-digit growth), we believe the stock is fairly valued at this juncture which warrants a MARKET PERFORM call.

Risks to our call include: (i) higher/lower-than-expected CPO price realized, (ii) dry weather impact on Indonesia’s production, and (iii) failure to implement biodiesel mandates.

Source: Kenanga Research - 29 Jun 2020