INVESTMENT HIGHLIGHTS

• Subscribing to a 20% stake in PTPSS for RM13.0m

• PTPSS will build palm refinery and palm kernel crushing business

• We are neutral on the news

• Maintain NEUTRAL with TP of RM2.36

Subscribing to a 20% stake in PTPSS for RM13.0m. IJM Plantation (via PT Indonesia Plantation Synergy or “PTIPS”) has subscribed to a 20% stake in PT Perindustrian Sawit Synergi or “PTPSS” for Rp. 44.0b (approximately RM13.0m). For the remaining stake, 75% will be subscribed by KLK with the remaining 5% by individual shareholders. PTIPS is a 90% owned subsidiary of PT Primabahagia Permai, which in turn is a 95% owned subsidiary of IJM Plantation.

PTPSS will build palm refinery and palm kernel crushing business. PTPSS will build, own and operate an integrated oil palm refinery complex which comprises a new oil palm refinery plant and a new palm kernel crushing plant.

We are neutral on the news. We expect limited near term earnings impact as it should take up to 2 years to build oil palm refinery plant. We gather that the palm kernel crushing plant is likely to be built after 2 years. Hence, we maintain our earnings estimate for FY18 and FY19. Net gearing impact is minimal as we expect it to increase from 0.31x to 0.32x.

Maintain NEUTRAL with TP of RM2.36. Valuation method is unchanged by using 19.5x Forward PE (mean valuation) on FY19 EPS estimate. Maintain Neutral on IJMP due to its subdued earnings outlook.

Source: MIDF Research - 27 Mar 2018