Stock Name: IJMPLNT
Company Name: IJM PLANTATIONS BHD
Research House: MIDF
IJM Plantations Bhd
(Jan 25, RM2.95)
Upgrade to buy at RM3 with target price RM3.52: IJM Plantations' (IJMP) share price has retraced by 2.6% year-to-date. We believe that this presents a good buying opportunity as we expect the CPO price to remain on the uptrend given the strong demand and supply fundamentals. We are also sanguine on the future performance of IJMP as 60% of the planted areas are prime mature trees. Based on our target price of RM3.52 and the expected dividend yield of 3.05%, we are expecting a total potential upside of 20.35%.
Given the better prospects for the CPO price moving forward, the return on equity for IJMP is expected to improve to 9.2% and 9.5% in FY11 and FY12 respectively, from a low of 6.6% in FY10.
We are expecting 308ha of Indonesian estates to start producing in FY12 and this would translate into 7.4% increase in fresh fruit bunch (FFB) production.
The FFB yield is estimated to increase by 3.1% year-on-year to 25 tonnes per hectare as the weather is expected to recover in 2HFY11.
We believe that the CPO price will continue its rising trend supported by the strong fundamental of stable demand coupled with the shortfall in supply. We maintain our target industry mean price at RM3,400 per tonne and realised CPO selling price for IJMP of RM3,247 per tonne and RM3,510 per tonne in FY11 and FY12 respectively.
IJMP's price retracement is due to profit-taking and not caused by an adverse shift in the company's fundamentals. This provides a buying opportunity to accumulate IJMP stock. We are upgrading IJMP to a 'buy' from 'neutral' with unchanged target price of RM3.52. The target price is pegged at 17.5 times EPS 12, based on its five-year historical PER. 'MIDF Research, Jan 25
This article appeared in The Edge Financial Daily, January 26, 2011.
Company Name: IJM PLANTATIONS BHD
Research House: MIDF
IJM Plantations Bhd
(Jan 25, RM2.95)
Upgrade to buy at RM3 with target price RM3.52: IJM Plantations' (IJMP) share price has retraced by 2.6% year-to-date. We believe that this presents a good buying opportunity as we expect the CPO price to remain on the uptrend given the strong demand and supply fundamentals. We are also sanguine on the future performance of IJMP as 60% of the planted areas are prime mature trees. Based on our target price of RM3.52 and the expected dividend yield of 3.05%, we are expecting a total potential upside of 20.35%.
Given the better prospects for the CPO price moving forward, the return on equity for IJMP is expected to improve to 9.2% and 9.5% in FY11 and FY12 respectively, from a low of 6.6% in FY10.
We are expecting 308ha of Indonesian estates to start producing in FY12 and this would translate into 7.4% increase in fresh fruit bunch (FFB) production.
The FFB yield is estimated to increase by 3.1% year-on-year to 25 tonnes per hectare as the weather is expected to recover in 2HFY11.
We believe that the CPO price will continue its rising trend supported by the strong fundamental of stable demand coupled with the shortfall in supply. We maintain our target industry mean price at RM3,400 per tonne and realised CPO selling price for IJMP of RM3,247 per tonne and RM3,510 per tonne in FY11 and FY12 respectively.
IJMP's price retracement is due to profit-taking and not caused by an adverse shift in the company's fundamentals. This provides a buying opportunity to accumulate IJMP stock. We are upgrading IJMP to a 'buy' from 'neutral' with unchanged target price of RM3.52. The target price is pegged at 17.5 times EPS 12, based on its five-year historical PER. 'MIDF Research, Jan 25
This article appeared in The Edge Financial Daily, January 26, 2011.
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