KUALA LUMPUR (Sept 22): Hong Leong IB Research has maintained its “Hold” rating on IJM Plantations Bhd (IJMP) with a target price of RM3.52 and said while the lagged impact of drought will likely weigh down on fresh fruit bunches production at its Sabah estates, the research house still expects IJMP’s FFB output to grow further, by 13.7% and 8.8% in FY03/16 and FY03/17 respectively, mainly underpinned by the young age profile of its plantation land bank in Indonesia.

In a note today, the research house said new planting to taper off (from an average of 4,100ha over the last 4 years), as IJMP is left with only circa 4,000 ha of unplanted land bank.

“Production cost is guided to remain flattish in FY03/16, at RM1,400-1,500/tonne, as it has earlier on locked in its fertilizer requirement (both in volume and ringgit).

“Management guided a total capex of RM300 million-RM350 million for the next 2 years, with bulk of the capex on the remaining new planting development works in Indonesia, as well as construction of a palm oil mill.

“Maintain earnings forecasts, target price of RM3.52, as well as Hold recommendation on the stock,” it said.