20120828 IOI Corp 1961 4QFY12 Results

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20120828 IOI Corp 1961 4QFY12 Results Empty 20120828 IOI Corp 1961 4QFY12 Results

Post by Cals on Tue 28 Aug 2012, 15:08

20120828 IOI Corp 1961 4QFY12 Results

Result

IOI Corporation’s FY12 net profit stood at RM1789m, decreased 19.5% y-o-y. Meanwhile, revenue was recorded at RM15640m, declined by a marginal 3.2% y-o-y.

Within expectation. IOI Corporation’s FY12 net profit was within our expectation, meeting 96.4% of our full year estimates but below consensus estimates, meeting only 89.7% of streets’.

Comment

PBT hit by translation loss. The Group’s profit before tax slid 17% y-o-y, owing to the translation loss on foreign currency denominating borrowings amounting to RM327mil against the translation gain of RM215mil in FY11. Stripping out the translation gain/loss, the Group’s profit before tax (ex-translation) in FY12 was indeed RM2706mil and RM2648mil in FY11, marginally up 2.2%.

Higher EBIT contribution from plantation division. Plantation division contributed higher EBIT by 4% attributed to higher realized CPO price of RM3135/MT in FY12 against RM2945/MT in FY11, mitigated softer fresh fruit bunches production in FY12 which saw a decline of 3.4% y-o-y.

Resource-based manufacturing division feeling the heat
. EBIT contribution of resource-based manufacturing division tumbled 36% y-o-y mainly attributable to fair value loss on derivative contracts amounting to RM88.2mil. Yet, the division’s ex-fair value loss/gain EBIT contribution was still declined by 13.4% y-o-y. We reckon that the division was facing the heat of stiff price competition from Indonesian refiners.

Property development arm reported lower operating profit. Property development segment reported lower operating profit, declined 14% y-o-y, stemming from slower take up rates.

Poised for a stronger FY13
. We expect the Group’s earnings to pick up in FY13 banking on better prospect of plantation segment. The Group is having more than 90% of matured palm tree and we expect FFB production to be abundant in the next few years. With the plantation segment made up 61% of the Group’s earnings in FY12, we expect the rebound of CPO prices would provide positive earnings momentum to the Group.

Second net interim dividend of 8.5 sen per share
. The Group has declared an interim dividend of 8.5 sen, bringing full year total dividend of 15.5 sen per share and and translating into a net dividend yield of 3%.

Earnings Outlook/Revision



We maintained our earnings forecast for FY13-14F. We also instate our earnings forecast for FY15.

Valuation & Recommendation


Maintain BUY with an unchanged target price of RM6.12. Our target price is pegged at 17x FY13F EPS which is in line with its 5-year average PE. We like the stock for its undemanding valuation which is currently trading at 14x FY13 EPS. In addition, we expect the Group to benefit from the CPO price rebound in 4Q12 being one of the sector leaders and its abundant CPO production.



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Cals
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