Yesterday, IOI Corp said its net profit fell to RM100,000 for 3QFY20 from RM245.8 million a year earlier.
Cumulative nine-month (9MFY20) net profit was down to RM362.6 million from RM585.1 million a year earlier, the conpany said.
Today, CGS-CIMB Securities Sdn Bhd analyts Ivy Ng Lee Fang and Nagulan Ravi wrote in a note that IOI Corp’s 9MFY20 core net profit of RM569 million, which excluded a foreign exchange (forex) translation loss of RM236 million, fell 7% year-on-year (y-o-y) due to weaker earnings from its resource-based segments and associates and joint ventures.
However, 3QFY20 core net profit grew 25% y-o-y, thanks to a higher plantation contribution, they said.
"We consider its 9MFY20 core net profit to be broadly in line with ours as it made up 70% of our full-year forecast and 68% of the Bloomberg consensus full- year estimate. We expect its 4QFY20 core net profit to be similar to the 3QFY20 performance, or improve slightly on the back of better results of its refining business. Reported earnings were below [expectations] due to forex translation losses arising from its US dollar-denominated loans.
"We maintain our earnings forecasts, SOP (sum-of-the-parts) TP of RM4.53 and 'hold' rating as its share price is fairly valued at the current level. Key upside risks are higher-than-expected CPO (crude palm oil) prices and potential earnings-accretive M&A (mergers and acquisitions). A key downside risk is lower CPO prices," they said.
Hong Leong Investment Bank Bhd (HLIB) analyst Chye Wen Fei wrote in a note today that IOI Corp's latest results were below expectations. Chye said its 3QFY20 core net profit of RM142.7 million took 9MFY20 core net profit to RM560.4 million.
"The results came in below expectations, accounting for only 67.3%-69% of consensus and our full-year estimates. Lower-than-expected FFB (fresh fruit bunch) output and performance of a 30%-owned associate (due to provision for doubtful debts and mark-to-market losses for commodity derivatives) were the key deviations to the results shortfall. We lower our FY20 core net profit forecast by 10.6% (FY21-22: -0.2%), largely to account for a lower FFB yield assumption for FY20 and lower earnings assumptions for the manufacturing segment.
Chye said that with the downward revision of HLIB’s SOP-derived TP for IOI Corp to RM3.82, the research house downgraded its rating for the company to "sell" from "hold" previously as valuation had become pricey following its recent share price performance.
On Bursa Malaysia today, IOI Corp’s share price had fallen six sen or 1.33% to RM4.44 as at 10.24am, with a market capitalisation of RM27.84 billion. The stock saw some 400,000 shares traded.