INVESTMENT HIGHLIGHTS

• Weak 1HFY19 earnings

• 1HFY19 core net income declined -84%yoy to RM5.7m

• Challenging outlook by the Company

• Earnings estimates reduced

• Maintain NEUTRAL with lower TP of RM1.75

Weak 1HFY19 earnings. IJM Plantation (IJMPLNT) 1HFY19 Core Net Income of RM5.7m is below expectation as it makes up only 6% of our full year FY19 earnings estimates. The negative deviation is caused by weaker than expected FFB production. Our CNI calculation excludes RM31.0m of operation forex loss and RM22.6m forex loss on borrowings. As expected, no dividend is announced.

1HFY19 core net income declined -84%yoy to RM5.7m. IJMPLNT 1HFY19 CNI declined -84%yoy to RM5.7m due to the decline in CPO prices by -14%/-19% in Malaysia/Indonesia to RM2326/RM1998 per tonne. Besides that, FFB volume also declined by -4%yoy to 449,306 tonnes.

Challenging outlook by the Company. IJMPLNT mentioned that “the Group continues to be affected by the start-up yields whilst incurring full plantation maintenance costs and overheads.

Earnings estimates reduced. FY19 earnings estimate reduced by -13% to RM75.4m. FY20 CNI estimate has been cut by -11% to RM78.2m. We have lowered our FFB volume assumption for both years.

Maintain NEUTRAL with lower TP of RM1.75. The lower TP is due to lower Core EPS estimated for FY19. Valuation method is unchanged by using 19.5x Forward PE (mean valuation) on FY19 EPS estimate. We maintain our NEUTRAL call on the stock. The weak earnings prospect in the near term should limit its share price upside.

Source: MIDF Research - 27 Nov 2018