INVESTMENT HIGHLIGHTS

• FFB growth to resume in FY18

• Young age profile of Indonesian estate to support long term FFB growth

• Focus on sustainability

• Maintain NEUTRAL with TP of RM3.53

We participated in IJM Plantation “Walk With The CEO” program recently and came away feeling positive on the Company’s long term outlook. During the three days event, we have visited IJM Plantation estates, mills, seed research centre, nursery and amenities for workers. Key takeaways from the visit are:

FFB growth to resume in FY18. IJM Plantation (IJMPLNT) has recently registered FFB growth of 2% in FY17 (ending March) to 862,000 MT. The low FFB growth is caused by tree stress (due to El Nino) which has affected its production throughout the first 9MFY17. Looking ahead, Mr. Joseph Tek (as reported by Bloomberg) expects the Company’s FY18 FFB volume to improve to 900,000 MT (+4%yoy) with better recovery to be seen in FY19 (+11%yoy to 1.0m MT).

Young age profile of Indonesian estate to support long term FFB growth. As IJMPLNT started its Indonesian estate planting progressively from FY2009, we estimate that its age profile should have reached 6 years old. This is a good age profile as oil palm trees tend to have high growth of FFB volume until it reach the peak at 10 years old. Hence, we think that the Indonesian estate should provide strong FFB growth for the next 5 years.

Focus on sustainability. We are briefed on many sustainability efforts done by the Company. Since 2009, IJMPLNT has been certified with the MPOB Code of Practices (CoPs). The Company is currently pursuing the Malaysian Sustainable Palm Oil (MSPO) and the International Sustainability & Carbon Certification (ISCC) in a phased approach for its Malaysian operations. For Indonesia operations, IJMPLNT focus will be on the Indonesian Sustainable Palm Oil (ISPO) mandatory certification.

Maintain NEUTRAL with TP of RM3.53. Our earnings estimate for FY17 and FY18 are maintained as the information gathered during the visit has been incorporated into our model previously. Our TP is based on 18.6x Forward PE on FY18 EPS of 18.95sen. While we are positive on IJMPLNT’s long term FFB growth, its near term FFB growth is limited at less than 5% hence our NEUTRAL call.

Source: MIDF Research - 2 May 2017