Maybank IB Research raises IOI Corp to Hold, ups TP


However, it pointed out IOI may not fully benefit from the recent spike in CPO average selling price in 1QFY21E of RM2,771/t (+37% YoY, +22% QoQ) due to the usual one month forward sales typical of integrated players (that is time-lag).

KUALA LUMPUR: IOI Corporation may not fully benefit from the recent spike in crude palm oil (CPO) price in 1QFY21E due to the usual one-month forward sales typical of integrated players, Maybank Investment Bank Research says.

In its research note issued on Monday, it said however the 1Q headline profits may get a boost from forex gain on its US debts.

“Ahead of IOI’s upcoming 1QFY21 results release, we raise our FY21-22E EPSs by +13%/+5% following our raised industry-wide CPO ASP forecasts.

“With that, we upgrade IOI to Hold (from Sell) with a new target price of RM4.84 (from RM4.27) on unchanged 31 times FY21E price-to-earnings ratio (PER) peg (its historical five-year mean), ” it said.

Maybank Research estimates 1QFY21E core net profit at RM240mil (+22% YoY, -1% QoQ) for its 1QFY21E core net profit (before forex translation gains and any fair value gains/losses on derivative FI).

However, it pointed out IOI may not fully benefit from the recent spike in CPO average selling price in 1QFY21E of RM2,771/t (+37% YoY, +22% QoQ) due to the usual one month forward sales typical of integrated players (that is time-lag).

“We estimate IOI’s 1QFY21E CPO average selling price at RM2,600/t (+29% YoY, +10% QoQ). As for fresh fruit bunches output, it posted a +9.6% YoY growth (+1.5% QoQ) for 1QFY21.

“Anticipating flat YoY FFB output growth for FY21E, IOI posted a relatively good +7% YoY growth for 4MFY21 (per Bursa announcement).

“Nonetheless, IOI is guiding for a flat YoY FFB output for FY21E (in line with the research house’s forecast) as it plans to accelerate replanting in FY21E, targeting 12,000 ha or 6.7% of total oil palm planted area.

“Replanting activities will probably hasten in 2HFY21 during the drier months, ” it said.

Maybank Research recently raised its 2020/2021 industry-wide CPO average selling price forecasts to RM2,660/t (from RM2,400) and RM2,500/t (from RM2,400) respectively.

As it raised its CPO average selling price for FY21E, it also trimmed its FY21E resource-based manufacturing EBITDA margin to 4.2% (from 4.6%) as the increase in CPO and PK prices (that is downstream feedstocks) will likely hurt margins. Overall, its FY21E-22E EPSs are revised by +13%/+5%.

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