The Star Online (24/05/2021) - KUALA LUMPUR: IOI Corporation Bhd is expected to post much stronger results in the fourth quarter ending June 30,2021 (4Q21), underpinned by higher palm oil prices and production, TA Securities Research says.

In its research note on Monday, it said IOI Corp management expects the overall financial performance for 4QFY21 to remain good, supported by high crude palm oil (CPO) price and increase in crop production from the plantation segment as well as the expected demand improvement in the manufacturing segment as the global economy recovers gradually.

“IOI’s target price is adjusted lower to RM5.06 a share (previously RM5.54) after the earnings revision, based on CY22 price-to-earnings ratio (PER) of 26 times.

“Reiterate our Buy recommendation. Key risks to our recommendation are: i) a lower-than-expected CPO price, and ii) weaker-than-expected margin compression in the downstream segment, ” it said.

TA Research said IOI Corporation’s (IOI) 3QFY21 results came in broadly within its, but above consensus’ full-year estimate.

Excluding the forex impact and other non-core items, 3QFY21 core net profit increased by 44.0% YoY to RM205.5mil.

It said contribution from associates increased significantly as its 30%-owned associate, Loders, recognised a one-off gain of RM267.9mil from the sale of its refinery in Rotterdam.

Cumulatively, 9MFY21 core net profit increased by 44.8% YoY to RM811.4mil, driven by higher contribution from the upstream division.

Plantation: 9MFY21 operating profit increased by 76.4% to RM701.0mil, spurred by higher palm oil prices despite a 1.9% drop in fresh fruit bunches (FFB) production.

The CPO price increased by 25.9% YoY to RM2,888/tonne while palm kernel (PK) price surged by 40.1% YoY to RM1,939 a tonne.

Manufacturing: 9MFY21 operating profit decreased by 12.6% YoY to RM210.5mil as a result of lower contributions from the oleochemical sub-segment with lower margins.

The contribution from associate increased significantly due to the one-off gain from the sale of its refinery.

Read more at https://www.thestar.com.my/business/business-news/2021/05/24/ioi-corp-to-post-stronger-results