INVESTMENT HIGHLIGHTS

• FY17 earnings within expectation

• Earnings growth driven by higher CPO price

• Earnings forecast maintained

• Maintain NEUTRAL with unchanged TP of RM3.53

FY17 earnings within expectation. IJM Plantations (IJMP) FY17 core net income of RM119.1m came in within expectations, at 95 % of our and consensus forecast. Dividend of 7sen per share was announced, translating into dividend yield of 2.2%.

Earnings growth driven by higher CPO price. IJMP registered core net income of RM24m for 4QFY17 as compared to core net loss of RM32m in 4QFY16, boosted by higher CPO price (+34%yoy) and higher FFB production (+30.5%yoy). Note that we have excluded forex gain and one-off adjustment to finance cost in our core net income calculation. That brought cumulative FY17 core net income to RM119.1m, increasing by 376%yoy. The higher earnings in FY17 were mainly underpinned by higher CPO price achieved of RM2753/mt in FY17 (+29%yoy) and mild recovery in FFB production (+2%yoy). The improved FFB production was due to 8.4% increase in FFB production from Indonesian estates which more than enough to offset the 3.4% decline in FFB production from Sabah estates. The mild recovery in FFB production shows that FFB production is recovering from El-Nino induced tree stress which has affected its FFB production throughout the first 9MFY17.

Earnings forecast maintained. We maintain our earnings forecast for FY18. We expect higher CPO prices coupled with recovery in FFB production to drive earnings growth in FY17. Meanwhile, we estimate FFB production to recover by 5% in FY17 from lagged impact of dry weather in FY16. We also introduce our earnings forecast for FY19.

Maintain Neutral with unchanged TP of RM3.53. We maintain our target price for IJMP at RM3.53, based on 18.6x Forward PE on FY18 EPS of 18.95sen. While production outlook for IJMP remains positive, its near term FFB growth is limited at ~5%. Hence, we maintain our Neutral recommendation on IJMP.

Source: MIDF Research - 26 May 2017