IJM Plantation

Investment Highlight

- Indonesian plantation to boost revenue significantly in FY2014. IJM Plantation has planted total of 13,000 hectares in Indonesia during FY2010 and FY2011. Thus, we expect FY2014 revenue to be boosted by 16% upon maturity. Thereafter, we expect revenue would be further enhanced from FY2016 onwards with the prime production period with FFB yield increase from current 23.7tonne/ha to 25.0 tonne/ha.

- Aiming planted landbank of 70,000 hectares in FY2013. IJM Plantation is having around 45,000 ha of planted area in Sabah and Indonesia and is aiming to grow its planted landbank to 70,000ha in FY2013. Effort to increase landbank will be focus in Indonesia where current landbank in Indonesia is around 20,000 ha. IJM Plantation aims to achieve 30,000-40,000 ha in Indonesia by planting 5,000-8,000 ha annually over the two to three years.

- Good mix of tree age profile. As at March 2011, IJM Plantation oil palm tree age profile consists of 64% of matured trees and 36% of immature trees. The large portion of immature trees is expect to sustain revenue growth.

- BUY with target price of RM3.75 based on 15.5x FY13F PE which is between its mean and +1 std dev of 20x as we are bullish on the long term prospect once the Indonesian estate starts to contribute.

Background

IJM Plantation, a pure plantation company was formed in 1985 with mere 4,000 hectares and has now grown to having 45,000 of total planted area in Sabah and Indonesia. IJM Plantation owns and operates 11 oil palm estates, complemented by four palm oil mills. Two of the palm oil mills are located in Sandakan and the other two mills are located in Sugut region. IJM Plantation has started expand plantation division in Indonesia since FY2009. CPO production of IJM Plantation has achieved a 5-year CAGR of 1.64%.