PETALING JAYA: Following guidance from IOI Corp Bhd that there will be no decline in fresh fruit bunch growth for financial year 2021 (FY21), Kenanga Investment Bank Research has turned more positive on the stock.
The plantation group had previously guided for FFB growth to be negative-to-flat at best. The new guidance for flat-to-positive growth offers significant upside to Kenanga’s expectation of -3% growth, said the research house.
“Raise FY21-22 estimates core net profit by 2-2% on higher FFB growth of +4% and +1% (versus -3% and +2% previously), but slightly weaker downstream.
“Note that we assume lower FY22E FFB growth on production normalisation and the group’s continued aggressive replanting target of around 10,000ha in FY22, it said.
Following better near-term prospects, Kenanga has upgraded IOI to “outperform” with a higher target price of RM4.80, from RM4.70 previously.
Meanwhile, IOI has guided for CPO price to be about RM2,700 per metric tonne until end-2020, which is line with Kenanga’s expectation for the price to trend lower over the coming months. The research house maintained its 2020-21 CPO price forecast of RM2,500 to RM2,600 per metric tonne.
In its downstream business, IOI’s oleochemical division is expected to remains relatively stable due to higher demand from personal hygiene and pharmaceutical sectors offset the decline in other sectors.
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