Stock Name: IOICORP
Company Name: IOI CORPORATION BHD
Research House: OSK
IOI Corporation's growth will continue to be below industry over the next four to five years, unless it plants more aggressively, says OSK Research.
"IOI's low production of young trees means its production growth would remain relatively stagnant, hence earnings growth and stock price appreciation would also slow down.
"The stock has been underperforming its peers and we do not see any rerating catalyst on the horizon," OSK said in a research note today.
OSK also said, based on its numbers, IOI's young mature trees only made up about eight per ent of its mature hectarage compared to its peers of 20 per cent to 35 per cent.
"Its percentage of trees not yet at peak maturity is also low at 15 per cent compared to its peers at 28 per cent to 46 per cent. This means IOI's growth will continue to be below industry, unless more aggressive planting takes place," OSK explained.
It also said with IOI's new refinery in Rotterdam having started operations in July and along with palm oil price volatility starting to pick up, refinery margin should improve.
However, this is provided, the company can ensure sufficient palm oil supply after cutting off Sinar Mas Group as supplier.
"We make no change to our earnings forecast, which has factored in contribution from the new refinery.
"There's room for an earnings upgrade if IOI's effective tax rate stays at its fourth quarter level and our target price based on 15 times of current year 2011 earnings, is maintained at RM3.91," OSK explained.
Meanwhile, Kenanga Research said: "Based on guidance, Fresh Fruit Bunches (FFB)production will most likely improve five per cent year-on-year and which we have adjusted accordingly in lowering our assumptions by some seven per cent." -- Bernama
Company Name: IOI CORPORATION BHD
Research House: OSK
IOI Corporation's growth will continue to be below industry over the next four to five years, unless it plants more aggressively, says OSK Research.
"IOI's low production of young trees means its production growth would remain relatively stagnant, hence earnings growth and stock price appreciation would also slow down.
"The stock has been underperforming its peers and we do not see any rerating catalyst on the horizon," OSK said in a research note today.
OSK also said, based on its numbers, IOI's young mature trees only made up about eight per ent of its mature hectarage compared to its peers of 20 per cent to 35 per cent.
"Its percentage of trees not yet at peak maturity is also low at 15 per cent compared to its peers at 28 per cent to 46 per cent. This means IOI's growth will continue to be below industry, unless more aggressive planting takes place," OSK explained.
It also said with IOI's new refinery in Rotterdam having started operations in July and along with palm oil price volatility starting to pick up, refinery margin should improve.
However, this is provided, the company can ensure sufficient palm oil supply after cutting off Sinar Mas Group as supplier.
"We make no change to our earnings forecast, which has factored in contribution from the new refinery.
"There's room for an earnings upgrade if IOI's effective tax rate stays at its fourth quarter level and our target price based on 15 times of current year 2011 earnings, is maintained at RM3.91," OSK explained.
Meanwhile, Kenanga Research said: "Based on guidance, Fresh Fruit Bunches (FFB)production will most likely improve five per cent year-on-year and which we have adjusted accordingly in lowering our assumptions by some seven per cent." -- Bernama
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