IOICORP (1961) : IOI Corp remains a Reduce by CIMB Research
KUALA LUMPUR: CIMB Equities Research is maintaining its Reduce recommendation on IOI Corp as the market has more than priced in the group's efficient plantation and downstream assets.
Its target price was RM4.32, which was 8.1% below the last traded price of RM4.70.
CIMB Research said on Tuesday IOI Corp’s first quarter core net profit ended Sept 30, 2014 (Q1, FY15), which excludes net forex translation losses, was broadly in line with its expectation (at 22% of full-year forecast) but fell short of consensus estimates (at only 19%).
“We expect better earnings in future quarters, driven by higher CPO prices and production. We keep our earnings forecasts and sum-of-part based target price intact.
“There are also concerns that it may be removed from the Shariah list during the end-November review as it does not meet the conventional debt/total asset ratio of less than 33%,” it said.
CIMB Research said IOI Corp’s Q1, FY15 net profit fell 41% on-year to RM177mil as the group no longer consolidates property earnings following the completion of the demerger.
“Net profit from continuing operations fell 3% on-year due mainly to lower manufacturing earnings. Plantation EBIT rose 12% on the back of higher ASP for palm kernel and stronger FFB production (+10% on-year).
“Resource-based manufacturing EBIT fell 50% on-year due to lower refining margin and lower sales volume of oleo products,” it said.
On a quarter-on-quarter basis, reported net profit declined 57% on-year due to absence of RM101mil forex gains, RM52mil demerger gains and property contributions following the spin-off of its property arm in Jan 2014. Key observations on 1QFY15 results
The sharp on-year decline in IOI’s resource-based manufacturing EBIT is similar to the lower refining contributions reported by its peers, namely Wilmar and Golden Agri, as a result of aggressive capacity expansion both locally and abroad.
Its Q1, FY15 fresh fruit bunches (FFB) yield recovered significantly from the year-ago level, which boosted FFB output by 10% on-year and 17% on-quarter. 1QFY15 average CPO price achieved of RM2,258 was broadly in line with Malaysian Palm Oil Board’s (MPOB) average.
In its recent AGM, the group said it expects CPO price to improve and hover at RM2,300 to RM2,500 by 1H2015, due to Malaysia’s plans to implement the B7 biodiesel mandate nationwide.
“The group targets to replant 5,000 to 8,000 ha of estates in Malaysia and plant around 6,000 ha of new palm oil estates in Indonesia per annum in the next three years. It is also reportedly in active talks with international players for potential joint ventures. We believe this is likely to be in the specialty fats industry,” said CIMB Research.
http://www.thestar.com.my
KUALA LUMPUR: CIMB Equities Research is maintaining its Reduce recommendation on IOI Corp as the market has more than priced in the group's efficient plantation and downstream assets.
Its target price was RM4.32, which was 8.1% below the last traded price of RM4.70.
CIMB Research said on Tuesday IOI Corp’s first quarter core net profit ended Sept 30, 2014 (Q1, FY15), which excludes net forex translation losses, was broadly in line with its expectation (at 22% of full-year forecast) but fell short of consensus estimates (at only 19%).
“We expect better earnings in future quarters, driven by higher CPO prices and production. We keep our earnings forecasts and sum-of-part based target price intact.
“There are also concerns that it may be removed from the Shariah list during the end-November review as it does not meet the conventional debt/total asset ratio of less than 33%,” it said.
CIMB Research said IOI Corp’s Q1, FY15 net profit fell 41% on-year to RM177mil as the group no longer consolidates property earnings following the completion of the demerger.
“Net profit from continuing operations fell 3% on-year due mainly to lower manufacturing earnings. Plantation EBIT rose 12% on the back of higher ASP for palm kernel and stronger FFB production (+10% on-year).
“Resource-based manufacturing EBIT fell 50% on-year due to lower refining margin and lower sales volume of oleo products,” it said.
On a quarter-on-quarter basis, reported net profit declined 57% on-year due to absence of RM101mil forex gains, RM52mil demerger gains and property contributions following the spin-off of its property arm in Jan 2014. Key observations on 1QFY15 results
The sharp on-year decline in IOI’s resource-based manufacturing EBIT is similar to the lower refining contributions reported by its peers, namely Wilmar and Golden Agri, as a result of aggressive capacity expansion both locally and abroad.
Its Q1, FY15 fresh fruit bunches (FFB) yield recovered significantly from the year-ago level, which boosted FFB output by 10% on-year and 17% on-quarter. 1QFY15 average CPO price achieved of RM2,258 was broadly in line with Malaysian Palm Oil Board’s (MPOB) average.
In its recent AGM, the group said it expects CPO price to improve and hover at RM2,300 to RM2,500 by 1H2015, due to Malaysia’s plans to implement the B7 biodiesel mandate nationwide.
“The group targets to replant 5,000 to 8,000 ha of estates in Malaysia and plant around 6,000 ha of new palm oil estates in Indonesia per annum in the next three years. It is also reportedly in active talks with international players for potential joint ventures. We believe this is likely to be in the specialty fats industry,” said CIMB Research.
http://www.thestar.com.my
