Top Story : IJM Plantations – Treading Cautiously Now Market Perform
Visit Note
- We garnered five main key takeaways from our recent company visit to IJMP, namely that: (1) IJMP is currently selling forward quite aggressively; (2) FFB production growth is expected to moderate from high single digit in FY09 to low single digits for subsequent two FYs; (3) OER is on declining trend; (4) Cost of production to rise by RM200/tonne in FY09; and (5) updates on IJMP’s Indonesian land planting schedule and plans for its biodiesel plant.
- All in, we revise our forecasts downward by 1-2% p.a. for FY09-10, and by 3.8% for FY11.
- Post-earnings revision, our fair value is RM2.05 (from RM2.10 previously). Despite our negative view on the sector and negative earnings growth projections for IJMP, we believe IJMP’s share price has largely reflected this already, and is more likely to trade in line with the market going forward. In addition, IJMP’s decent gross dividend yields of 5-6% p.a. will help support share price. No change to our Market Perform recommendation.-RHB
Last week support at RM1.58
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