INVESTMENT HIGHLIGHTS

• Aiming for FFB growth of 8% in FY18

• To replant 1,000 ha in FY18 and FY19

• Neutral on the recent subscription of 20% in PTPSS

• Maintain NEUTRAL with TP of RM2.36

Aiming for FFB growth of 8% in FY18. We recently met up with IJM Plantation (IJMPLNT) and came away feeling neutral on the Company in the near term. The Company is aiming for 8% FFB growth in FY18. The growth will be from its Indonesian estate which is expected to register strong FFB growth of 15% yoy with flattish growth in Malaysia estate (between 1% to 2% growth). For the first 11 months of FY2018, IJMPLNT FFB production has increased 8% yoy to 853,455 tonnes. Looking ahead into FY19, we expect IJMPLNT to register FFB production growth of 7% yoy with the growth driver remain same being the Indonesian estate.

To replant 1000 ha in FY18 and FY19. IJMPLNT has replanted 1,000 ha of its landbank in FY18 in Sabah and plans to replant another 1,000 ha in FY19. We believe that the disciplined replanting is necessary to ensure optimal FFB yield and Oil Extraction Rate (OER) in the long run. Expansion of new planting is very minimal in FY18 and this trend is likely to continue in FY19 as the Company has limited landbank left in Indonesia.

Neutral on the recent subscription of 20% in PTPSS. IJMPLNT has recently subscribed to 20% stake in PT Perindustrian Sawit Synergi or “PTPSS” for Rp. 44.0b (approximately RM13.0m). Management shared that the construction period for the future refinery is between 18 to 24 months’ time. We reiterate our neutral view on the news given its limited impact to 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. Earnings estimate is maintained as the information gathered from the meeting has been imputed previously. 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 - 30 Mar 2018