Affin Hwang Research maintains Add for IJM Plantations
KUALA LUMPUR: Affin Hwang Investment Research is maintaining its Add rating for IJM Plantations but lowered the target price to RM3.63 from RM3.71.
It said on Tuesday the conversion of the expiring warrants in September 2014 was slightly EPS-dilutive.
“We expect IJM Plantaions’ strong fresh fruit bunches production growth prospects to help support the share price.
“We expect total mature area to almost double as large immature areas in Indonesia reach maturity. Coupled with relatively high yields, we see a superior FFB-production growth outlook in the next few years, driving IJM Plantaions’ FY16-17E price-to-earnings ratios (PERs) significantly lower,” it said.
Affin Hwang Research said the crude palm oil (CPO) for third month delivery had rebounded from the year’s low of RM1,929 by 20% to RM2,306.
Even though export growth remains lacklustre, FFB yields may have peaked early in August and have been trending lower.
The government’s decision to extend CPO export duties until December and implement (in stages) the B7 biodiesel mandate to cut inventory levels as well as the more upbeat price expectations of key planters and forecasters have further boosted sentiment.
IJM Plantations’ share price has also rebounded by an impressive 12% from the low of RM3.22 two weeks ago.
“A key attraction of IJM Plantations is its superior FFB-production growth in the next few years. Estimated average palm ages of 13.4 years and 3.5 years for its Sabah and Indonesian plantations give a young blended average of 8.0 years.
“With the large immature areas in Indonesia, we expect the total mature area for the group to almost double to approximately 53,000 ha in three years from 27,802 ha currently.
“Coupled with relatively high yields in Indonesia, we now expect group FFB production to grow by 17% in FY15E, 20% in FY16E and 12% in FY17E (up from around 730,000 tonnes in FY14),” it said.
Affin Hwang Research said trimmed its FFB-production forecasts for FY15 and FY17 by 2.2% and 1.1%, respectively, and raised its FY16 by 1.7%.
By FY18, it expects FFB production from IJM Plantations’ Indonesian plantations to exceed that from the Sabah estates.
It also said the group has another 4,000 ha awaiting permit and certification in Indonesia.
“Management has no plans for significant new land acquisitions. Instead, the focus will be on extracting maximum yields from new areas planted in Indonesia. Replanting of old areas in Sabah should continue,” it added.
http://www.thestar.com.my
KUALA LUMPUR: Affin Hwang Investment Research is maintaining its Add rating for IJM Plantations but lowered the target price to RM3.63 from RM3.71.
It said on Tuesday the conversion of the expiring warrants in September 2014 was slightly EPS-dilutive.
“We expect IJM Plantaions’ strong fresh fruit bunches production growth prospects to help support the share price.
“We expect total mature area to almost double as large immature areas in Indonesia reach maturity. Coupled with relatively high yields, we see a superior FFB-production growth outlook in the next few years, driving IJM Plantaions’ FY16-17E price-to-earnings ratios (PERs) significantly lower,” it said.
Affin Hwang Research said the crude palm oil (CPO) for third month delivery had rebounded from the year’s low of RM1,929 by 20% to RM2,306.
Even though export growth remains lacklustre, FFB yields may have peaked early in August and have been trending lower.
The government’s decision to extend CPO export duties until December and implement (in stages) the B7 biodiesel mandate to cut inventory levels as well as the more upbeat price expectations of key planters and forecasters have further boosted sentiment.
IJM Plantations’ share price has also rebounded by an impressive 12% from the low of RM3.22 two weeks ago.
“A key attraction of IJM Plantations is its superior FFB-production growth in the next few years. Estimated average palm ages of 13.4 years and 3.5 years for its Sabah and Indonesian plantations give a young blended average of 8.0 years.
“With the large immature areas in Indonesia, we expect the total mature area for the group to almost double to approximately 53,000 ha in three years from 27,802 ha currently.
“Coupled with relatively high yields in Indonesia, we now expect group FFB production to grow by 17% in FY15E, 20% in FY16E and 12% in FY17E (up from around 730,000 tonnes in FY14),” it said.
Affin Hwang Research said trimmed its FFB-production forecasts for FY15 and FY17 by 2.2% and 1.1%, respectively, and raised its FY16 by 1.7%.
By FY18, it expects FFB production from IJM Plantations’ Indonesian plantations to exceed that from the Sabah estates.
It also said the group has another 4,000 ha awaiting permit and certification in Indonesia.
“Management has no plans for significant new land acquisitions. Instead, the focus will be on extracting maximum yields from new areas planted in Indonesia. Replanting of old areas in Sabah should continue,” it added.
http://www.thestar.com.my
