INVESTMENT HIGHLIGHTS

• Total dividend of 16.0 sen to go ex tomorrow

• Lack of catalysts going forward

• Healthy FFB growth in the first 8 months

• Earnings estimate maintained

• Downgrade to NEUTRAL with TP of RM4.80

Total dividend of 16.0 sen to go ex tomorrow. On 16-March, we expect IOI Corporation Berhad (IOICORP) share price to adjust for special dividend of 11.5 sen and first interim dividend of 4.5 sen. Note that IOICORP has announced the special dividend of 11.5 sen on 5-March after the completion of the divestment of 70% stake in Loders Croklaan (Loders) on 1-March. The first interim dividend of 4.5 sen was announced on 23-February during the 2QFY18 result release. The payment date will be 30-March for both dividends.

Lack of catalysts going forward. As the special dividend of 11.5 sen has gone ex, we believe that there will be limited catalyst going forward. In the next quarter earnings release expected in May-2018, we do not expect IOICORP to announce any dividend in line with its historical practice.

Healthy FFB growth in the first 8 months. In the first 8 months of FY18, IOICORP produced 2.47m tonnes of Fresh Fruit Bunches (FFB). This represents a healthy 16% growth yoy against the same period last year mainly due to recovery from El Nino. Despite the strong double digit FFB growth expected in FY18, we expect its FFB growth to return to single digit in FY19.

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

Downgrade to NEUTRAL with TP of RM4.80: We have reduced our Target Price to RM4.80 based on 23.0x PE (mean valuation) on FY18 EPS. Previously, our Target Price was RM5.50 based on 26.3x PE (+1.0 Standard Deviation valuation). Our reduction in PE is to reflect the absence of major catalysts post the special dividend ex-date. Despite the downgrade, IOICORP share price is supported by its decent fundamentals with good FFB growth and improvement in balance sheet post the 70% stake sale in Loders Croklaan.

Source: MIDF Research - 15 Mar 2018