IJMPLNT (FV RM3.77 - BUY) FY12 Results Review: Lacking Short Term Catalyst

IJM Plantations remains a Buy, but our FV is trimmed slightly to RM3.77. Although lacking in near term catalysts, its long term prospects remain good, with 21k ha already planted in Indonesia. We estimate that some 5k ha will come into maturity in CY14. The company continues to make progress with new planting, with an estimated 21k ha planted. This means  that it  added some 8k of planted acreage during the financial year. Relative to its long-term growth prospects, the stock is trading at an undemanding 12x forward earnings.

Below our expectation. Stripping out one-off items, most of which  were  related to impairment of a co-generation plant amounting to RM11m, IJM Plant’s FY12 core earnings came in at RM175.5m, which was within our forecast of RM184.0m, but slightly below consensus forecast of RM188.4m. Still, on the back of  a  10.5% higher realized CPO price of RM3,049 per tonne and a 16.6% production growth,  the company’s  core earnings grew by an impressive 20.8% in FY12.

Year of good  harvest. IJMP’s  FY12 production benefited from a region-wide bumper harvest, which led to its FFB production rising to 670,832 tonnes. Its FY12 numbers also got a boost from 21,979 tonnes of FFB from its Indonesian estates. Excluding the Indon contribution, its Malaysian production of 648,853 tonnes was still up by 12.8%.

Flattish production this year. IJMP’s Malaysian production will probably be flattish this year as most of its trees in Sabah  are fully mature. While the company  still has young mature areas to drive growth,  this would  probably be marginal as  the  older trees experience some decline in production.

Indonesian planting to contribute in FY14. Management indicated that its large scale planting in Indonesia  on  some 21k ha will start contributing in FY14, which is not surprising given that the significant planting started in CY10. The company’s first mill in Kalimantan will start operation in 2HFY13.

Adjusting forecast. We are trimming our FY12 forecast slightly to RM197.2m  vs RM202.2m earlier to factor in a higher production cost to allow for increases in fertilizer prices and wages.  We also introduce our FY14 forecast at RM201.9m. With the reduction in FY13 forecast, our FV is accordingly revised down to RM3.77 from RM3.80 previously, based on 16x on CY12 earnings. Maintain Buy.

Source: OSK