KUALA LUMPUR (Oct 23): IJM Plantations Bhd is facing a delay in harvesting due to logistical issues at its estate in East Kalimantan, Indonesia, according to Affin Hwang Capital Research.

"There were insufficient barges to carry the crude palm oil (CPO) to the refineries... meanwhile, oil storage tanks are full," Affin Hwang analyst Nadia Aquidah wrote in a note today.

This could result in major crop losses if the situation persists, causing the research house to lower its fresh fruit bunches and CPO production assumptions.

Higher production costs are also assumed due to an increase in labour costs in Malaysia, with production tracking lower than expected.

"The minimum wage in Malaysia is set to rise to RM1,050 starting Jan 1, 2019 from RM1,000 in Peninsular Malaysia and RM920 in East Malaysia. The CPO cost of production for Malaysia in its 2019 financial year (FY19) could potentially climb to RM1,800 to RM1,900 per metric tonne from about RM1,650 per metric tonne in FY18," Nadia said.

This led to a downward revision of the research house's forecasts of IJM Plantations' core earnings per share by 11% to 41% between FY19 and FY21.

"Given our earnings cut, we lower our 12-month target price to RM1.51 from RM1.88 and reaffirm our 'sell' rating," Nadia said.

Shares in IJM Plantations had declined 2 sen or 1% to trade at RM1.96 this morning, matching an eight-year low it hit on Oct 18.