KUALA Lumpur Kepong Bhd (KLK) seems to have bet on the right horse judging from the performance of IJM Plantation Bhd’s 2Q FY3/2022 results which beat market expectations.
Stripping out exceptional items, IJM Plantation’s core net profit surged to RM93.3 mil from RM40.2 mil recorded last year, according to TA Securities Research.
The better-than-expected results was mainly due to better margins and higher realised crude palm oil (CPO) prices. Cumulatively, the company’s 1H FY3/2022 core net profit stood at RM150.1 mil compared to RM27.6 mil recorded a year ago.
“We will consolidate new forecasts into KLK’s earnings model,” noted analyst Angeline Chin in a ceasing coverage note.
For the record, KLK which has managed to secure 94.89% or 835.57 million shares in IJM Plantation as of Nov 18 does not intend to maintain the listing status of the latter.
In view of this, Bursa Malaysia Securities Bhd will suspend the trading of IJM Plantation shares starting from Nov 26 (Friday), being the expiry of five market days from the final closing date of the offer on Nov 18.
“We cease coverage on IJM Plantation with immediate effect with our last target price benchmarked to the offer price of RM3.10 by KLK,” asserted TA Securities Research.
Kenanga Research which is also ceasing its coverage on IJM Plantation, too, expects sequential improvement for the company in its 3Q FY3/2022.
“Premised on higher CPO prices and sustained fresh fruit bunch (FFB) output, we think 3Q FY3/2022 should improve sequentially,” projected the research house.
It further projected FFB output for 3Q FY3/2022 to remain strong but decline in 4Q FY3/2022.
“Our earlier FY3/2022 FFB growth estimate of +2% year-on-year (vs 1H FY3/2022: -2%) could be too optimistic,” opined Kenanga Research. “That said, FY3/2022 will be an excellent year for IJM Plantation in terms of earnings.”
All-in-all, the research house raised IJM Plantation’s core net profit for FY3/2022-3/2023E by 62%/17% on higher CPO price of circa RM3,700-RM3,000/metric tonne (MT) (vs circa RM3,100-RM2,800/MT previously) but with lower FFB growth of -2% and 5% (from +2% and 4%) respectively.
At 10.04am, IJM Plantation was unchanged at RM3.10 with 7,700 shares traded, thus valuing the company at RM2.73 bil. – Nov 22, 2021
