INVESTMENT HIGHLIGHTS

• 1HFY19 Core Net Income is below expectation

• Core Net Income dipped 53% yoy to RM11.1m

• Earnings estimate lowered

• Maintain NEUTRAL with lower TP of RM1.76 1HFY19

Core Net Income is below expectation. Fima Corporation Berhad (FIMACOR) 1HFY19 Core Net Income (CNI) of RM11.1m is below expectation, making up 31% of our full year FY19 forecast. The negative deviation is caused by lower than expected FFB volume. In our CNI calculation, we have excluded mainly RM23.6m of writeback on impairment loss on property, plant and equipment. As expected, an interim dividend of 5.0 sen is announced and this is at similar amount against same period last year.

Core Net Income dipped 53% yoy to RM11.1m. The decline in earnings is mainly due to lower CPO price which has declined by 15% yoy to RM2010 per tonne in 1HFY19. Volume of fresh fruit bunches (FFB) produced has also declined 19% yoy to 71,391 tonnes in 1HFY19. "Production of security and confidential documents" division revenue also declined by 10% yoy to RM68.0m in 1HFY19.

Earnings estimate lowered. We have reduced our FY19 CNI estimate by 8% to RM32.8m. For FY20, CNI has been trimmed by 2% to RM31.7m. We have lowered our FFB volume assumption for FIMACOR.

Maintain NEUTRAL with lower TP of RM1.76. The reduction in TP is in line with lower earnings estimated for the plantation division. Our TP is based on Sum-Of-Parts valuation (Refer Below). Despite the challenging earnings prospect for both plantation and PSCD divisions, FIMACOR balance sheet is strong with net cash position of RM179m.

Source: MIDF Research - 23 Nov 2018