1HFY22 CNP of RM149.6m is above both our (80%) and consensus’ (84%) expectations, due to higher CPO prices. Strong CPO price alongside firm FFB output should yield sequential 3QFY22 earnings improvement. Raise FY22-23E CNP by 62-17%. As shares of IJMP will be suspended from 26 Nov 2021 with the intention of withdrawing its listing status, we are ceasing active coverage. The stock is now a NOT RATED (from ACCEPT OFFER @ Offer Price of RM3.10).

Above expectation. 2QFY22 registered Core Net Profit (CNP) of RM93.3m (+66% QoQ; +175% YoY), which brought 1HFY22 CNP to RM149.6m (+515% YoY) which is above both our/consensus’ expectations at 80%/84%, respectively, due to higher CPO prices. However, 1HFY21 FFB output of 516k MT (-2% YoY) is deemed below at 48% of our estimate, in anticipation of a slowdown in Malaysia’s output. Absence of DPS is as expected.

Higher CPO prices paved the way. QoQ, 2QFY22 CNP rose (66%) boosted by higher weighted average CPO price (+12%) and FFB output (+10%). Both its Malaysia PBT and Indonesia PBT (adjusted for forex) improved 67% and 45%, respectively. YoY, 1HFY22 CNP surged (+515%; from a low base) as higher weighted average CPO price (+52%) overwhelmed a slip in FFB output (-2%).

Sequential improvement expected in 3QFY22. Premised on higher CPO prices (MPOB QTD-3QFY22 CPO price: +17% QoQ) and sustained FFB output, we think 3QFY22 should improve sequentially. FFB output for 3QFY22 should remain strong, but a decline in 4QFY22 is expected. Our earlier FY22 FFB growth estimate of +2% YoY (vs. 1HFY22: -2%), could be too optimistic. That said, FY22 will be an excellent year for IJMP in terms of earnings.

Raise FY22-23E CNP by 62-17% on higher CPO price of c.RM3,700-3,000/MT (vs. c.RM3,100-2,800/MT previously), but with lower FFB growth of -2% and 5% (from +2% and 4%), respectively.

Cease coverage. We will cease coverage on the stock as KLK has acquired >90% of IJMP’s shares and does not intend to maintain its listing status. Shares of IJMP will be suspended from 26 Nov 2021 and KLK will procure IJMP to take the requisite steps to withdraw its listing status. Our latest call on the stock is now a NOT RATED (from ACCEPT OFFER @ Offer Price of RM3.10) with FY22-23E earnings forecasts of RM304.1-175.2m.

Source: Kenanga Research - 22 Nov 2021