• 6MFY17 earnings broadly within expectations

• Higher sequential earning

• Weaker earnings on year due to weak FFB production

• Maintain NEUTRAL with unchanged TP of RM3.13

6MFY17 earnings broadly within expectations. IJM Plantations (IJMP) 6MFY17 core net income of RM54.6m was broadly within expectations, meeting 39% and 46% of our and consensus full year estimates respectively. Note that we have excluded forex gain of RM14.8m in our core net income calculation.

Higher sequential earning. IJMP registered core net profit of RM34.8m for 1QFY17, increasing 76%qoq. The higher sequential income was mainly due to higher group FFB production (+21%qoq) while CPO prices were flattish. FFB production from Sabah estates climbed 43%qoq, mitigating a marginal 5.8% decline in FFB production from Indonesian estates. The higher FFB production from Sabah estates was due to seasonally higher production in 2Q and as FFB production recovered from the weak production in 1QFY17 which was dampened by dry weather.

Weaker earnings on year due to weak FFB production. IJMP core net profit in 1QFY17 dropped 15%yoy, mainly due to slightly lower FFB production (-1%yoy). Notably, FFB production declined at a smaller quantum in 2QFY17 as comparing to a 16%yoy production decline in 1QFY17, indicating waning impact from El-Nino induced drought. On a cumulative basis, 6MFY17 earnings declined by 21%yoy due to overall weaker FFB production (-8%yoy), which partially cushioned by higher CPO prices (+23%yoy).

Maintain Neutral with unchanged TP of RM3.13. We maintain our earnings forecast for FY17/18 as we expect stronger earnings recovery going forward. Net income of IJMP is expected to come in stronger in 2HFY17 due to seasonally higher FFB production in 3QFY17 and high CPO prices. Also intact is our TP of RM3.13, based on 18.6x Forward PE on FY17 EPS of 16.8sen. Maintain Neutral on IJMP as its FY17 FFB production outlook is flattish

Source: MIDF Research - 29 Nov 2016