IJM Plantations - Indonesian output more than doubled in 9MFY13 BUY

- Reiterate BUY on IJM Plantations Bhd (IJMP) with an unchanged fair value of RM3.25/share. Our fair value is based on a PE of 16x on IJMP’s FY14F basic EPS.

- IJMP’s 9MFY13 results were in-line with our forecast and consensus estimates. The group reported a 35.2% YoY decline in net profit in 9MFY13 as turnover softened by 22.9%.

- IJMP’s EBIT margin edged down from 44.1% in 9MFY12 to 36.7% in 9MFY13, led by lower selling prices and higher wages and fertiliser costs.

- FFB production in Malaysia shrank 10.1% YoY to 476,444 tonnes in 9MFY13. A lag impact of the drought, which took place in early-2010, affected IJMP’s FFB production in 1HFY13.

- However, since 2QFY13, IJMP’s FFB output has recovered. The group recorded 207,793 tonnes of FFB production in Malaysia in 3QFY13, which were 28.2% more than the 162,031 tonnes achieved in 2QFY13.

- IJMP realised an average CPO price of RM2,749/tonne in 9MFY13 versus RM3,027/tonne in 9MFY12.

- IJMP’s average CPO price realised was marginally higher than MPOB’s (Malaysian Palm Oil Board) spot price for Sabah of RM2,720/tonne in 9MFY13 (9MFY12: RM3,107/tonne).

- IJMP’s plantation division in Indonesia accounted for 8.9% of group FFB production in 9MFY13.

- FFB output of the plantation division in Indonesia rose 130.5% from 16,367 tonnes in 9MFY12 to 37,719 tonnes in 9MFY13.

- For the financial year, FFB production from Indonesia is expected to range between 50,000 tonnes and 60,000 tonnes.

- Comparing 3QFY13 against 2QFY13, IJMP’s net profit eased 16.2% due to lower selling prices. Although FFB output in Malaysia surged 28.2% QoQ in 4QFY12, we reckon that not all of the CPO produced was sold.

- This was reflected in IJMP’s inventory, which rose from RM75.3mil as at end-Sept 2012 to RM117.0mil as at endDec 2012.

Source: AmeSecurities