This article first appeared in The Edge Financial Daily on May 18, 2018
IOI Corp Bhd
(May 17, RM4.75)
Maintain neutral with an unchanged target price (TP) of RM4.50: IOI Corp Bhd’s nine-month financial year 2018 (9MFY18) core net profit (CNP) of RM925 million was within our expectations at 75% of our full-year forecast. It was above the consensus (81% of the consensus estimate) as the consensus may have underestimated fresh fruit bunch (FFB) growth for IOI. No dividend was announced.
Its 9MFY18 CNP grew by 12% year-on-year (y-o-y) to RM925 million as FFB volume improved 17% y-o-y to 2.75 million tonnes. This more than offset the 6% decline in the crude palm oil (CPO) price to RM2,593 per tonne. However, third quarter of FY18 CNP declined 26% y-o-y to RM209 million as the CPO price was down by 21% y-o-y to RM2,471 per tonne.
As the special dividend of 11.5 sen went ex on March 16, 2018, we believe that there will be limited catalysts going forward. But our earnings estimates are maintained. We maintain our FY18 CNP forecast of RM1.23 billion, and FY19’s at RM1.26 billion.
Our TP is based on 26.3 times price-earnings ratio on FY18 earnings per share, reflecting +1.0 standard deviation valuation. IOI’s share price is supported by its strong fundamentals with good FFB growth and improvement in balance sheet post the 70% stake sale of Loders Croklaan. — MDIF Research, May 17