INVESTMENT HIGHLIGHTS

• FY18 earnings above ours but below consensus estimate

• Operationally better but affected by low CPO price

• FY19 earnings estimate increased by 2% to RM99.2m

• Maintain NEUTRAL with higher TP of RM2.30

FY18 earnings above ours but below consensus. IJM Plantation (IJMPLNT) FY18 Core Net Income of RM70.3m came in above our expectation as it makes up 113% of our estimate. The positive deviation is caused by better than expected cost control in 4QFY18 as operating expenses declined 19% yoy against 4QFY17. However, the CNI came in below consensus estimate of RM81.0m. Our CNI calculation excludes RM23.5m forex loss. As expected, a dividend of 5.0 sen is announced (exdate: 27-June-2018).

Operationally better but affected by low CPO price. IJMPLNT registered FFB growth of 8% yoy to 932,950 tonnes in FY18. Out of these, half of the FFB came from Malaysia with the remaining from Indonesia. Despite the healthy FFB growth, earnings was affected by low CPO price realised which declined 4% yoy to RM2639 per tonne. Looking ahead into FY19, we expect IJMPLNT to register decent FFB growth of 7% with the growth mainly coming from its young Indonesian estates.

FY19 earnings estimate increased by 2% to RM99.2m. We have lowered our operating expenses assumption hence the higher FY19 earnings estimate. We also introduce our FY20 CNI estimate of RM110.0m.

Maintain NEUTRAL with higher TP of RM2.30. The higher TP is due to higher Core EPS estimate for FY19. Valuation method is unchanged by using 19.5x Forward PE (mean valuation) on FY19 EPS estimate. Maintain Neutral on IJMPLNT due to its limited earnings growth upside in the near term.

Source: MIDF Research - 31 May 2018