Kenanga Research upgrades IOI Corp to Outperform, raises target price

by **Cals** Mon 09 Dec 2013, 13:36

Business & Markets 2013

Written by Zatil Husna of theedgemalaysia.com

Monday, 09 December 2013 11:55

KUALA LUMPUR (Dec 9): Kenanga Research has upgraded IOI Corporation Bhd to “outperform” with a higher target price of RM6.50 (from RM5.40) due to optimism of the demerger of its property arm, IOI Properties Bhd.

In a note today, Kenanga said the demerger of IOI Properties will conclude a better outlook for the company, should the demerger turns successful.

“With the successful implementation of the demerger, IOI Corp valuation should trade on par with Kuala Lumpur Kepong Bhd (KLK).

“We believe that IOI Corp may get additional focus from investor in 2014 especially if CPO prices manage to break through RM2700/mt.,” it said.

This is due to its large market cap and pure plantation play once the demerger complete, which is expected in Jan 2014.

The research house has raised IOI Corp’s PE to the same level of KLK due to reason specified above. The higher CY14E EPS is in line with our CPO prices estimate increase to RM2800/mt.

“We believe that IOI Corp valuation has been suppressed previously due to its significant earnings contribution from property segment.

“We have increased our CPO prices forecast for CY14 to RM2800/mt from RM2700/mt.,” the research house said.

For the FY14E and FY15E core earnings have been increased by 3% each to RM1.78 billion and RM2.15 billion respectively, it said.

On Friday (Dec 6), IOI Corp announced the final listing reference price for its planned IOI Properties listing at RM2.51 per share, from RM1.76.