IOIC’s FY15 (Jun) results were in line with expectations. No change to our NEUTRAL recommendation, although we slightly lower our SOPbased TP to MYR4.05 (from MYR4.40), implying a 3% upside. Catalysts to look out for include the possible reinstatement of its Shariah status during the next Nov 2015 review, as well as a CPO price increase which would affect IOIC’s net profit by 3-5% for every MYR100/tonne.

FY15 numbers are in line. IOI Corp‟s (IOIC) FY15 core net profit was in line with our and consensus expectations, at 97-103% of the respective FY15 forecasts. The group recorded an exceptional loss of MYR859.1m in FY15, comprising a translation loss on forex debt of -MYR771.4m, fair value gain on derivatives of +MYR36.1m and unrealised fair value loss on foreign currency forward exchange contracts in the manufacturing division of -MYR123.8m. None of the forex losses incurred in 4QFY15 were realised. The company declared a second interim net DPS of 4.5sen, bringing FY15 net DPS to 9 sen, translating to a payout ratio of 56% and net yield of 2.3%.

Core net profit down 31% YoY. FY15 core net profit declined 31% YoY on a 9% dip in revenue, caused by the absence of property contributions and weaker manufacturing contributions (-31% YoY), as the EBIT margin for the latter fell to 4.6% (from 6.6% in FY14). This was exacerbated by weaker plantation contributions (-16%) arising from lower CPO (-11%)and palm kernel (-9%) prices, offset slightly by higher FFB output (+1%).

Trimming estimates. Despite the in-line earnings, we trim our net profit forecasts by 2-4% for FY16-17, after reducing our FFB production forecasts to reflect a 2.7% growth for FY16 (from 3.5%) to account for the current dry weather in Sabah, as well as reducing our CPO price assumption for FY16 to MYR2,350/tonne (from MYR2,425). We also update our forecasts with the latest in-house currency projections. We introduce our FY18 forecast, with a CPO price assumption of MYR2,600/tonne.

Still NEUTRAL. We have also cut our P/E target for IOIC‟s plantations division to 17x (from 18x) to account for the weak market sentiment and foreign outflow of funds. Our SOP-based TP is, therefore, reduced to MYR4.05 (from MYR4.40). We highlight that every MYR100/tonne change in the price of CPO could affect IOIC earnings by 3-5% for every MYR100/tonne. Maintain NEUTRAL.