IOI Corp Bhd
(Jan 23, RM4.74)
Maintain neutral with a higher target price (TP) of RM4.40 from RM4.35: At our recent Asean Corporate Day Conference, investor interest was aplenty for IOI Corp. Topics discussed included expansion plans for its downstream division, its syariah status, and its exposure to US dollar-denominated debt.

We tweak our forecasts upwards slightly and nudge our sum-of-parts (SOP)-based TP up to RM4.40 (6.4% downside). Maintain “neutral”, as valuations remain fair. We hosted IOI Corp at our recent Asean Corporate Day held in Kuala Lumpur over two days on Jan 15 and Jan 16. IOI Corp was represented by its chief executive officer Datuk Lee Yeow Chor, chief financial officer  Kevin Wong, and investment manager Lawrence Leong. 

Investor interest was considerable, and management met with close to 30 institutional investors. Investors were interested in the group’s strategy going forward with regard to expansion plans for its upstream and downstream businesses, the outlook for crude palm oil prices and fresh fruit bunch production, as well as IOI Corp’s syariah status, among others.  Other topics touched on included the group’s exposure to US dollar-denominated debt, possible foreign exchange losses given the recent weakness of the ringgit, as well as its capital expenditure (capex) plans going forward.

We tweak our financial year 2015 (FY15) to FY17 earnings forecasts upwards by 1% to 3% per annum, after imputing the changes to the manufacturing division’s capacity as well as lower capex assumptions.

Post-earnings revision, we raise our SOP-based TP to RM4.40 (from RM4.35). Our TP is based on an unchanged 18 times calendar year 2015 (CY15) target price-earnings forecast to its plantation division, 12 times CY15 for its manufacturing division, and our TP of S$1.48 (RM3.96) for its Bumitama Agri Ltd (“buy”) associate. As valuations remain fair at current levels with no significant share price catalysts in sight, we maintain our “neutral” recommendation. — RHB Research Institute Sdn Bhd, Jan 23

This article first appeared in The Edge Financial Daily, on January 26, 2015.