Public Invest Research maintains Neutral on IOI Corp

KUALA LUMPUR: Public Invest Research continues to recommend IOI Corp with a Neutral call as valuations seem unattractive at current levels relative to its sum-of-parts derived target price of RM4.82.

The research house said on Thursday that to date, the group has a total landbank of 230,000ha in Malaysia and Indonesia.

The group’s planted area stands at 163,000ha in Malaysia and 13,000ha in Indonesia. Unplanted landbank is about 30,000ha, which will take three to four years to complete the new planting.

Public Invest Research said IOI Corp will become a pure integrated plantation company upon the demerger of the property arm under IOI Properties.

“Management guided that it will maintain its previous dividend per share (DPS), indicating that the group will revise its dividend payout higher as earnings will be reduced due to the removal of property contribution, which accounts for 30%-35% of the group’s earnings previously.

“For FY14, the group has earmarked RM410mil for total capex spending. Plantation and resource based manufacturing will be allocated RM236mil and RM174mil respectively. Banking on its annual operating cash flow of RM1.1bn-RM1.4bil and current net gearing of 0.5 times, we think that there would not be any funding issues,” said the research house.