KUALA LUMPUR (Oct 11): IOI Corp Bhd is aiming to increase its oleochemical earnings by RM100 million, or more than 35%, by FY21, according to a report by Public Invest Research. 

The research house explained that in a recent conference call with the management of IOI Corp, the group said it has commenced construction of a new 110,000 metric tonne (MT) per year oleochemical plant in Prai, Penang with a capital expenditure of RM220 million. 

The plant is poised to be completed by the second quarter of 2022 (2Q22) and help to boost its oleochemicals earnings for FY21 by more than 35%. 

“The new plant is mainly catered for palm and palm kernel based fatty acids and glycerine, which are the main raw materials for personal care and cosmetic products,” said the research house. 

Meanwhile, the group is also planning to diversify into other high-value crops to reduce its dependency on palm oil revenue, said Public Invest. 

One of the alternative crops the group has started planting is pineapples in Johor, as an intercrop to its total planted area of about 300ha of coconut trees. 

Public Invest said pineapples and coconuts are seen as cash crops that could take up to a year to mature. 

It added that there are plans to plant another 1,000ha of coconut trees and 300ha of kenaf within the next two years. 

“Kenaf will be planted in flood prone areas as it can withstand floods. Once it has achieved sizable plantation area, the group will explore various processing facilities to cater for the markets,” it said. 

The coconuts planted can also be sent to its oleochemical plant in Germany for downstream processing, added the research house. 

IOI Corp is also planning to convert oil palm byproducts and processing waste into value-added products at competitive cost. 

The research house mentioned that the oil palm giant was recently awarded contracts for the construction of a palm wood factory in Segamat, Johor, to convert oil palm trunks into high performance palm wood boards and panels to cater for European markets. 

According to the research house, the management of IOI Corp foresees a stronger performance in FY22 as crude palm oil (CPO) price has been bullish, despite the flat fresh fruit bunch (FFB) production. 

It has managed to lock in a small portion of CPO sales at RM4,600 per MT. 

FFB production is expected to be stagnant for FY22 as a result of replanting activities amounting to 7,100ha. There is a remaining 500ha plantable area in Kalimantan which will be completed by end-FY22. 

IOI Corp plans to achieve 100% RSPO certification by 2023 after resolving the land dispute in Sarawak and completing the remaining new plantings in Kalimantan. 

Public Invest has maintained a “neutral” call on IOI Corp with an unchanged target price of RM4.41 as it sees limited upside potential for the stock. 

At 10.54am, IOI Corp’s share price was up by 0.99% to RM4.10, valuing the company at RM25.77 billion.