INVESTMENT HIGHLIGHTS

• 1HFY18 Core Net Income is within expectation

• Earnings declined yoy

• Better performance from the plantation division

• Earnings estimate maintained

• Maintain BUY with TP of RM2.60 due to attractive valuation

1HFY18 Core Net Income is within expectation. Fima Corporation Berhad (FIMACOR) 1HFY18 Core Net Income (CNI) of RM23.7m is within expectation. Although it made up 42% of our full year earnings estimate, we are expecting 2HFY18 earnings to pick up due to strong CPO price and good FFB production outlook. Core net income exclude RM1m write down and other one off items. As expected, an interim dividend of 5.0 sen is announced.

Earnings declined yoy. FIMACOR 1HFY18 CNI declined 26% yoy to RM23.7m. This is mainly caused by lower PBT for the "production of security and confidential documents" division. Its PBT is down by 54% yoy to RM14.8m. We gather that this division has experienced a decline in sales volume for a certain travel document.

Better performance from the plantation division. The plantation division PBT surged by 71% yoy to RM21.3m due to improved CPO price yoy and higher FFB volume.

Earnings estimate maintained. We maintain our FY18 CNI of RM56.9m. FY19 CNI is also maintained at RM63.5m.

Maintain BUY with TP of RM2.60. Our TP is based on Sum-OfParts valuation (Refer Page 3). Although we expect FY18 CNI to decline yoy, the stock is supported by attractive valuation of 9.1x Forward PE and good dividend yield of 5.8%. Its balance sheet is strong with net cash position.

Source: MIDF Research - 23 Nov 2017