• 1QFY18 earnings below expectations

• Lower sequential earnings

• Weaker earnings on yearly basis

• Maintain NEUTRAL with a revised TP of RM3.00

1QFY18 earnings below expectations. IJM Plantations (IJMP) 1QFY18 core net income of RM17.7m was below expectations, meeting only 11% and 3% of our and consensus full year estimates respectively. The negative deviation was due to higher-than-expected cost incurred from its Indonesian operations. As expected, no dividend was declared.

Lower sequential earnings. IJMP recorded core net income of RM17.7m for 1QFY17, decreasing by 26%qoq. Note that we have excluded forex gain and one-off adjustment to finance cost under FRS139 in our core net income calculation. The lower sequential earnings were mainly due to lower CPO prices (-10%qoq to RM2753/mt) which more than offset the higher FFB production (+22.3%qoq to 242k mt).

Weaker earnings on yearly basis. IJMP 1QFY18 core net income fell 11%yoy despite higher CPO price achieved of RM/2753mt in FY17 (+7%yoy) and recovery in FFB production (+26%yoy). The lower-thanexpected earnings were mainly due to higher cost incurred for its Indonesian operations where IJMP incurred full fixed plantation maintenance and overhead costs for its young mature areas. Meanwhile, the higher FFB production in 1QFY18 was due to 3.8% and 54.3% increase in FFB production from Indonesian estates and Sabah estates respectively. FFB production continues to recover from El-Nino induced tree stress which has affected its FFB production in FY17 whereby FFB production of IJMP in FY17 increased only by a marginal 1.7%yoy.

Maintain Neutral with a revised TP of RM3.00. We cut our earnings forecast for FY18/19 by 18.9%/12% after inputting higher cost of production. Correspondingly, our TP for IJMP has been revised to RM3.00 (previously: RM3.50), based on 19.5x Forward PE on FY18 EPS of 15.37sen. Maintain Neutral on IJMP due to its unexciting near term earnings outlook.

Source: MIDF Research - 24 Aug 2017