INVESTMENT HIGHLIGHTS

• 9MFY18 earnings below expectations

• Lower earnings yoy in 9MFY18

• Earnings estimate lowered

• Maintain NEUTRAL with a revised TP of RM2.36

9MFY18 earnings below expectations. IJM Plantations (IJMP) 9MFY18 core net income (CNI) of RM49.4m was below expectations, meeting only 40% and 57% of ours and consensus full year estimates respectively. The negative deviation was due to higher-than-expected production cost.

Lower earnings yoy in 9MFY18. IJMP 9MFY18 CNI fell 48%yoy to RM49.4m despite higher revenue (+8%yoy to RM605.9m). We gather that the cost was higher due to increased young mature areas incurring full plantation maintenance and overheads against a start-up yield. The depreciation and overheads has also increased with the commencement of the second palm oil mill.

Earnings estimate lowered. FY18 CNI has been cut by 48% to RM64m. FY19 CNI has been reduced by 34% to RM102m. We have increased our cost assumption.

Maintain Neutral with a revised TP of RM2.36. Our TP for IJMP has been revised to RM2.36 (previously: RM2.85). We have lowered our Core EPS and rollover our valuation t0 FY19. Valuation method is unchanged by using 19.5x Forward PE. Maintain Neutral on IJMP due to its subdued earnings outlook.

Source: MIDF Research - 28 Feb 2018