KUALA LUMPUR: PublicInvest Research is forecasting flattish results for IOI Corp Bhd
in its upcoming earnings announcement on Nov 12 due to lower upstream earnings offset by higher downstream.
"We think resource-based business should deliver stellar results given a lower feedstock cost."
The research house maintained its neutral call on the counter with a lower target price of RM4.13 after rolling over its valuations to FY20.
In a Friday report, PublicInvest said it forecasts a 5% year-on-year decline in IOI's fresh fruit bunch (FFB) production for FY19F
It said IOI's FY19F forecast for low single-digit growth in FFB production is too optimistic given the steep decline of 18% year-on-year in 1QFY19.
PublicInvest also noted that nearly 68% or RM3.5bil of IOI's total borrowngs is foreign borrowings.
"Therefore, the strengthening of US dollar could result in some non-cash foreign exchange translation loss on its USD-denominated borrowings in the upcoming results."
IOI has allocated bigger capex of RM550mil for FY19 compared to RM450.9mil in FY18 despite the poor crude palm oil price performance.
"Nearly 66% or RM363m will be spent on the upstream plantation activities, which include new planting, replanting and upgrading for the existing mills."
The mature area of the plantations expanded by 2.2% y-o-y to 148,934ha in FY18 and is expected to expand by another 3,000ha this year, backed by maturing estates in Indonesia.
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