PETALING JAYA: IOI Corp Bhd is expected to perform better for the financial year ending June 30, 2022 (FY22) than in FY21, with earnings led by its plantation division, say analysts.
The plantation giant ended FY21 on a high note, with an impressive earnings growth of 84% year-on-year (y-o-y) to RM1.4bil, buoyed by both plantation and resource-based manufacturing operations.
PublicInvest Research in its latest report said “the sterling FY21 results made up 118% and 111% of ours and the street expectations, respectively.”
A final dividend per share (DPS) of six sen was declared in the fourth quarter FY21, bringing the full-year DPS to 10.5 sen from eight sen in FY20.
“Nevertheless, we make no changes to our FY22-FY24 earnings forecasts as we expect to see weaker resource-based manufacturing earnings, dragged by more competitive refining and oleochemical margins as well as slower demand,” added the research house.
PublicInvest Research has maintained a neutral call on the stock with an unchanged sum-of-parts (SOP)-based target price of RM4.41.
. (File pic)" src="https://apicms.thestar.com.my/uploads/images/2021/08/26/1269573.jpg" onerror="this.src='https://cdn.thestar.com.my/Themes/img/tsol-default-image2017.png'" style="width: 620px; height: 413px;">People viewing models of IOI Properties. (File pic)
Meanwhile, CGS-CIMB Research expects strong crude palm oil (CPO) prices to drive IOI’s earnings in the first half of FY22.
“Overall, the group expects to perform better in FY22 which is in line with our forecast of 10% growth in FY22 core net profit.
“We have also raised the first half of FY22 core earnings per share (EPS) by 6% to reflect a higher CPO price assumption of RM3,300 per tonne compared with RM2,700 per tonne,” it said in a report yesterday.
However, CGS-CIMB Research has lowered its fresh fruit bunch (FFB) output and downstream profit assumptions.
“For FY23, we cut our EPS to reflect the lower FFB output and downstream earnings,” added the research house.
CGS-CIMB has reiterated a hold rating on IOI with a higher target price of RM4.01 as “the stock appears fairly valued and we see support from its share buyback programme.”
In FY21, IOI bought back 18.2 million shares at an average price of RM4.02 per share.
The key upside risks for IOI includes higher CPO prices and earnings-accretive mergers and acquisitions, added the research house.
Maybank Investment Bank (Maybank IB) Research in its report expects IOI’s core profit after tax and minority interests (Patmi) for FY22 to be as good as FY21 as IOI slows its replanting plan and captures the lagged benefits of higher prices in FY22.
Following its earnings upgrade, the research house said IOI remains a buy with a new target price of RM5.16.
Maybank IB is also raising its FY22-FY23 CPO average selling price (ASP) and core Patmi.
The Q4 FY21’s higher quarter-on-quarter CPO ASP proves that “IOI is enjoying the higher CPO ASPs on a lagged basis due to the forward sales arrangement within its integrated operation.”
Hence, IOI may record higher y-o-y ASPs in FY22 should the present high prices sustain till early 2022.
“Following our raised 2021 industry-wide CPO ASP forecast to RM3,500 from RM3,100 per tonne earlier, and 2022-2023 to RM2,800 from RM2,600 per tonne previously, we have raised our estimated FY22-FY23 Patmi for IOI by 25% and 8% respectively,” added the research house.