PP 7767/09/2010(025354)

Malaysia
RHB Research
Corporate Highlights Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su lts N ot e
MARKET DATELINE 26 August 2010

IJM Plantations Share Price

Fair Value
:
:
RM2.50
RM2.30
Benefitting From Improved Prices, But Valuations Still Recom : Underperform
(Maintained)
Stretched

Table 1 : Investment Statistics (IJMPLNT; Code: 2216) Bloomberg Ticker : IJMP MK

Net EPS Net
FYE Turnover Profit ^ EPS Growth PER C.EPS* P/NTA P/CF ROE Gearing GDY
Mar (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2010 406.7 90.0 10.2 (46.9) 24.5 - 1.8 11.9 6.6 cash 2.0
2011f 506.3 119.2 14.9 45.7 16.8 15.0 1.7 14.6 9.4 cash 2.2
2012f 557.7 128.9 16.1 8.2 15.5 17.0 1.6 13.4 9.6 cash 2.4
2013f 533.3 118.3 14.8 (8.2) 16.9 18.0 1.6 13.9 8.3 cash 2.2
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates ^ Normalised

♦ In line. IJMP’s 1QFY03/11 core net profit was in line with our and RHBRI Vs. Consensus
consensus estimates, making up 23% of our and consensus FY03/11 Above
projections. IJMP recorded an EI gain of RM2.5m in 1QFY03/11, relating to In Line
a gain on disposal of a plantation asset. No dividend was declared for the Below

quarter.
Issued Cap (m shares)- fd
♦ Core net profit rose 156% yoy on the back of a 20% increase in for rights and warrants 881.0

turnover. The higher revenue was due to a 10% yoy rise in CPO average Market Cap (RMm) 2,203.4
Daily Trading Vol (m shs) 1.0
price to RM2,480/tonne and 24% rise in PKO average price to
52wk Price Range (RM) 2.36-2.84
RM3,227/tonne, coupled with a 13% yoy increase in FFB production. The
Major Shareholders: (%)
larger rise in net profit was due to the stronger selling prices and an
IJM Corporation 54.6
estimated 10% yoy decline in production costs, due, we believe, to lower
Desa Plus S/B 7.5
fertiliser prices, which translated to higher EBIT margins of 31.4% in
1QFY11 (from 15.0% in 1QFY10).
FYE Mar FY11 FY12 FY13
♦ FFB production to recover. Going into FY11-12, we believe management
EPS chg (%) - - -
expects FFB production to return to single-digit growth of about 5-7% p.a., Var to Cons (%) (0.8) (5.3) (18.0)
assuming no unforeseen drastic weather patterns. We however, prefer to
maintain our more conservative projection of 3-4% growth for FY11-12 for PE Band Chart
now, until we obtain further clarity from management. We expect a larger
jump in FFB production to only come in from FY13/14 onwards, when its PER = 16x
PER = 13x
Indonesian plantations start maturing. Based on IJMP’s CPO price achieved PER = 10x
in 1QFY11, we believe our average CPO price assumption of
RM2,550/tonne for FY03/11 would be achievable. We maintain our CPO
price assumptions of RM2,600/tonne for FY03/12 and RM2,500/tonne for
FY03/13.
♦ Risks. Main risks include: (1) a convincing reversal in crude oil price trend
Relative Performance To FBM KLCI
resulting in reversal of CPO and other vegetable oils price trend; (2)
weather abnormalities resulting in an over or under supply of vegetable FBM KLCI
oils; 3) increased emphasis on implementing global biofuel mandates and
trans-fat policies; and 4) a quick global economic recovery, resulting in
higher-than-expected demand for vegetable oils. IJM Plantations

♦ Forecasts. No change to our forecasts.

♦ Recommendation. We maintain our fair value of RM2.30, based on

unchanged target PER of 14.5x CY11 earnings. Maintain Underperform,
as we believe valuations remain stretched at current levels. Catalysts
would include a spike in CPO prices, given IJMP’s sensitivity to CPO prices.
Hoe Lee Leng
Note that every RM100 change in CPO price would affect IJMP’s earnings (603) 92802184
by 5-7%. hoe.lee.leng@rhb.com.my

Please read important disclosures at the end of this report.

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 26 August 2010

Table 2 : IJM Plantations Quarterly Results

FYE Mar QoQ YoY YoY

1Q10 4Q10 1Q11 1QFY10 1QFY11 Comments
(RMm) (%) (%) (%)

Turnover 94.3 102.0 113.3 11 20 94.3 113.3 20 10% yoy rise in CPO average
price and 24% rise in PKO
average price, coupled with a
13% yoy increase in FFB
production

EBIT 14.1 32.6 35.6 9 152 14.1 35.6 152

EBIT margin 15.0 31.9 31.4 15.0 31.4 YoY margin improved due to
(%) higher CPO prices and better
FFB yields

Net inc/(exp) (0.7) (1.1) 0.0 (100) (100) (0.7) - (100)

Assoc. & JVs 0.6 2.1 0.7 (69) 3 0.6 0.7 3

EI (2.8) (7.7) 2.5 (132) (189) (2.8) 2.5 Gain on disposal of plantation
asset of RM2.5m in 1QFY11 and
land compensation payment in
1QFY10 of RM2.8m

Pretax profit 11.3 25.8 38.8 50 243 11.3 38.8 243 Filtered down from stronger
EBIT and EI gain

Taxation (3.3) (10.1) (8.9) (12) 167 (3.3) (8.9) 167

Eff. rate (%) 29.4 39.0 22.9 29.4 22.9 Lower due to recognition of fair
value gain from derivatives not
subject to tax

MI (0.1) (0.0) (0.0) (67) (99) (0.1) (0.0) n.m.

Net profit 7.9 15.7 29.9 90 279 7.9 29.9 279 Filtered down from PBT and
lower effective tax rate

Core net 10.7 23.4 27.4 17 156 10.7 27.4 156

profit

EPS (sen) 1.2 2.0 3.7 90 203 1.2 3.7 203

Ave CPO 2,249 2,368 2,480 5 10 2,249 2,480 10

Price (RM/t)

FFB prodn (t) 125 141 142 1 13 125 142 13 Due to improvement in FFB
yields on the back of better
weather in Sabah

Source : Company, RHBRI estimates

Table 3. IJMP Earnings Forecasts Table 4. IJMP Forecast Assumptions

FYE Mar (RMm) FY10a FY11F FY12F FY13F FYE Mar FY11F FY12F FY13F

Turnover 406.7 506.3 557.7 533.3 FFB Produced (‘000 t) 617 639 632
Turnover growth (%) (17.3) 24.5 10.1 (4.4) CPO Production (‘000 t) 163 177 176
PKO Production (‘000 t) 24 25 25
Cost of Sales (222.3) (271.7) (301.6) (295.4) Average CPO price (RM/t) 2,550 2,600 2,500
Gross Profit 184.4 234.6 256.0 238.0

EBITDA 149.7 183.2 164.8 153.6

EBITDA margin (%) 36.8 36.2 29.5 28.8

Depreciation & (28.5) (32.1) (1.8) (1.8)

Amortisation
Net Interest (0.6) 5.5 6.7 3.6
Associates 2.6 2.6 2.6 2.6
Exceptional items 1.0 0.0 1.0 2.0

Pretax Profit 112.6 159.2 172.2 158.0

Tax (33.0) (39.8) (43.0) (39.5)
PAT 79.7 119.4 129.1 118.5
Minorities (0.2) (0.2) (0.2) (0.2)
Net Profit 79.5 119.2 128.9 118.3
Source: Company data, RHBRI estimates

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IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
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securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

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actions of third parties in this respect.

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