Stock Name: IOICORP
Company Name: IOI CORPORATION BHD
Research House: AFFIN
IOI Corp Bhd
(May 18, RM5.31)
Upgrade to buy at RM5.19 with higher target price of RM7.02 (from RM6.34): Net profit in 3QFY11 increased by 19.6% year-on-year (y-o-y) to RM656.7 million mainly due to: (i) higher average selling price (ASP) for crude palm oil [CPO] (RM3,019 per tonne against RM2,480 in 3QFY10) and palm kernel (RM2,772 per tonne against RM1,337) partially offset by lower fresh fruit bunches (FFB) production; (ii) higher profit contributions from resource-based manufacturing (largely due to a fair value gain of RM99.1 million) and property development (due to RM22 million compensation for land acquisition); and (iii) a lower effective tax rate (due to non-taxable income). Sequentially, 3QFY11 net profit increased by 26.2% mainly due to higher profit contribution from resource-based manufacturing, further boosted by a lower effective tax rate.
Net profit in 9MFY11 increased by 12.5% y-o-y to RM1.67 billion, mainly due to higher profit contribution from plantation (higher ASP partially offset by lower FFB production) and property (gain on disposal of RM61 million and compensation of RM22 million), partially offset by lower profit from resource-based manufacturing (lower margins from oleochemical and speciality fats) but boosted by a lower effective tax rate due to non-taxable income.
No interim dividend has been declared in 3QFY11. A higher interim single-tier dividend of'' eight sen per share in 1HFY11 (1HFY10: seven sen) has been paid. We expect a final net dividend per share of'' five sen to bring full-year net DPS to 13 sen (yield of 2.5%).
Core net profit for 9MFY11of RM1.39 billion amounted to 67% of our full-year FY11 core net profit forecast of RM2.09 billion and 64% of consensus average of RM2.19 billion. Even though 9MFY11 looks slightly short percentage-wise, we expect IOI Corp to meet our FY11 core net profit forecast on the back of stronger plantation and property profit in 4QFY11. Our FY11/13 profit forecasts, which are based on a CPO ASP assumption of RM3,200 per tonne are hence maintained.
Rolling forward our valuation from 18 times CY11 earnings per share of 35.6 sen to 18 times CY12 EPS of 39 sen, our target price is raised from RM6.34 to RM7.02. At a current price of RM5.19, return of 35%, we upgrade our stock call from 'add' to 'buy'. ' Affin Investment Bank Research, May 18
This article appeared in The Edge Financial Daily, May 19, 2011.
Company Name: IOI CORPORATION BHD
Research House: AFFIN
IOI Corp Bhd
(May 18, RM5.31)
Upgrade to buy at RM5.19 with higher target price of RM7.02 (from RM6.34): Net profit in 3QFY11 increased by 19.6% year-on-year (y-o-y) to RM656.7 million mainly due to: (i) higher average selling price (ASP) for crude palm oil [CPO] (RM3,019 per tonne against RM2,480 in 3QFY10) and palm kernel (RM2,772 per tonne against RM1,337) partially offset by lower fresh fruit bunches (FFB) production; (ii) higher profit contributions from resource-based manufacturing (largely due to a fair value gain of RM99.1 million) and property development (due to RM22 million compensation for land acquisition); and (iii) a lower effective tax rate (due to non-taxable income). Sequentially, 3QFY11 net profit increased by 26.2% mainly due to higher profit contribution from resource-based manufacturing, further boosted by a lower effective tax rate.
Net profit in 9MFY11 increased by 12.5% y-o-y to RM1.67 billion, mainly due to higher profit contribution from plantation (higher ASP partially offset by lower FFB production) and property (gain on disposal of RM61 million and compensation of RM22 million), partially offset by lower profit from resource-based manufacturing (lower margins from oleochemical and speciality fats) but boosted by a lower effective tax rate due to non-taxable income.
No interim dividend has been declared in 3QFY11. A higher interim single-tier dividend of'' eight sen per share in 1HFY11 (1HFY10: seven sen) has been paid. We expect a final net dividend per share of'' five sen to bring full-year net DPS to 13 sen (yield of 2.5%).
Core net profit for 9MFY11of RM1.39 billion amounted to 67% of our full-year FY11 core net profit forecast of RM2.09 billion and 64% of consensus average of RM2.19 billion. Even though 9MFY11 looks slightly short percentage-wise, we expect IOI Corp to meet our FY11 core net profit forecast on the back of stronger plantation and property profit in 4QFY11. Our FY11/13 profit forecasts, which are based on a CPO ASP assumption of RM3,200 per tonne are hence maintained.
Rolling forward our valuation from 18 times CY11 earnings per share of 35.6 sen to 18 times CY12 EPS of 39 sen, our target price is raised from RM6.34 to RM7.02. At a current price of RM5.19, return of 35%, we upgrade our stock call from 'add' to 'buy'. ' Affin Investment Bank Research, May 18
This article appeared in The Edge Financial Daily, May 19, 2011.
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