INVESTMENT HIGHLIGHTS

• 1HFY18 earnings in line

• 1HFY18 CNP grew by 17% yoy to RM716m

• Sale of 70% stake in Loders Croklaan should complete soon and this should lead to special dividend of 13.0 sen

• Earnings estimate maintained

• Maintain BUY with TP of RM5.50

1HFY18 earnings in line. IOI Corporation Berhad (IOICORP) core net profit (CNP) of RM716m is within our expectation at 54% of our full year FY18 forecast. However, it is above consensus (62% of consensus estimate) as consensus may have underestimated the FFB growth for IOICORP. As expected, IOICORP announced a dividend of 4.5 sen (ExDate: 16-March-2018).

1HFY18 CNP grew by 17% yoy to RM716m as FFB volume improved 11% yoy to 1.89m tonnes and CPO price increase slightly by 1% yoy to RM2,650 per tonne. 2QFY8 CNP surged 23% yoy to RM427m as FFB volume jumped 23% yoy to 1.02m tonnes. This has more than offset the lower CPO price impact (-4% yoy to RM2,644 per tonne) in 2QFY18.

Sale of 70% stake in Loders Croklaan should complete soon and this should lead to special dividend of 13.0 sen. IOICORP mentioned that the divestment of 70% stake in Loders Croklaan (Loders) is expected to complete in 3QFY18. As IOICORP Financial Year End is June, we expect the deal to complete soon by end-March 2018. We are positive on the news as this should pave the way for the special dividend of 13.0 sen in which we expect it to be announced by end of September 2018.

Earnings estimate maintained. We maintain our FY18 CNP of RM1.32b. We also maintain our FY19 CNP of RM1.31b.

Maintain BUY with TP of RM5.50: Our TP is based on 26.3x PE on FY18 EPS reflecting +1.0SD valuation. We continue to like IOICORP for three reasons: i) we expect special dividend of 13.0 sen in the next 6 to 7 months, ii) its sale of low margin business is likely to result in investment in upstream plantation business which command much better margin and iii) substantial improvement in balance sheet after the 70% stake sale in Loders. IOICORP is our Top Pick for the plantation sector.

Source: MIDF Research - 26 Feb 2018