PP 7767/09/2010(025354)

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
27 May 2010
MARKET DATELINE

IJM Plantations Share Price

Fair Value
:
:
RM2.40
RM2.30
No Surprise, No Excitement Recom : Underperform
(Maintained)

Table 1 : Investment Statistics (IJMPLNT; Code: 2216) Bloomberg Ticker : IJMP MK

Net EPS Net
FYE Turnover Profit ^ EPS Growth PER C.EPS* P/NTA P/CF ROE Gearing GDY
Mar (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2010 406.7 90.0 10.2 (46.9) 23.5 1.6 11.4 7.5 cash 2.1
2011f 506.3 119.2 14.9 45.7 16.1 16.0 1.6 14.0 9.3 cash 2.3
2012f 557.7 128.9 16.1 8.2 14.9 17.0 1.6 16.2 9.5 cash 2.5
2013f 533.3 118.3 14.8 (8.2) 16.3 1.5 17.6 8.3 cash 2.3
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates ^ Normalised

♦ In line. IJMP’s FY03/10 core net profit was in line with our and consensus RHBRI Vs. Consensus
estimates, making up 99-102% of our and consensus FY03/10 projections. Above
IJMP recorded an EI loss of RM7.7m in 4QFY03/10, relating to impairment In Line
losses for its JV investments. Although no details were disclosed, we Below

believe this could be relating to IJMP’s 60% stake in its biodiesel plant,
Issued Cap (m shares)- fd
which is dormant at the moment. IJMP declared a 5 sen single tier dividend for rights and warrants 881.0
(FY09: 8 sen), which translates to net payout of 45%, or net yield of Market Cap(RMm) 2,115.2
2.1%, which was slightly higher than our projected 4 sen DPS. Daily Trading Vol (m shs) 1.0

♦ Core net profit fell 27% yoy on the back of a 17% drop in turnover
52wk Price Range (RM) 2.33-2.92
Major Shareholders: (%)
in FY10. The lower revenue was due to lower CPO and PKO prices achieved
IJM Corporation 54.6
of RM2,246/tonne (-15% yoy from RM2,641/t) and RM2,555/tonne (-18%
Desa Plus S/B 7.5
yoy from RM3,107/tonne), offset slightly by higher FFB production (+1%
yoy). The larger drop in net profit was due to the weaker selling prices,
which translated to lower EBIT margins of 30.7% (from 32.9% in FY09). FYE Mar FY11 FY12 FY13
EPS chg (%) (2.0) (4.6) -
♦ FFB production to return to single-digit. Going into FY11-12, Var to Cons (%) (7.0) (5.3) -
management expects FFB production to return to single-digit growth of
about 5% p.a., assuming no unforeseen drastic weather patterns. We PE Band Chart
however, prefer to maintain our more conservative projection of 2-4%
growth for FY11-12. We expect a larger jump in FFB production to only PER = 22x
PER = 19x
come in from FY13/14 onwards, when its Indonesian plantations start PER = 16x
PER = 13x
maturing. We maintain our average CPO price of RM2,550/tonne for
FY03/11, RM2,600/tonne for FY03/12 and introduce our FY03/13 forecasts
with CPO price assumption of RM2,500/tonne.
♦ Risks. Main risks include: (1) a convincing reversal in crude oil price trend
resulting in reversal of CPO and other vegetable oils price trend; (2)
Relative Performance To FBM KLCI
weather abnormalities resulting in an over or under supply of vegetable
oils; 3) increased emphasis on implementing global biofuel mandates and FBM KLCI
trans-fat policies; and 4) a quick global economic recovery, resulting in
higher-than-expected demand for vegetable oils.
IJM Plantations
♦ Forecasts. Post-adjustment of FY03/10 earnings, we tweak our forecasts
by -2.0% to -4.6% for FY11-12 and introduce our FY13 forecasts. We have
not included any further losses for the JV investments in our forecasts for
now, pending more information from our meeting with management today.

♦ Recommendation. Post earnings revision, our fair value is reduced

slightly to RM2.30 (from RM2.35), based on unchanged target PER of
Hoe Lee Leng
16.5x CY10 earnings. Maintain Underperform, as we believe valuations (603) 92802184
remain stretched at current levels. hoe.lee.leng@rhb.com.my

Please read important disclosures at the end of this report.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com
 27 May 2010

Table 2 : IJM Plantations Quarterly Results

FYE Mar QoQ YoY YoY

4Q09 3Q10 4Q10 FY09 FY10 Comments
(RMm) (%) (%) (%)

Turnover 79.0 120.9 102.0 (16) 29 491.6 406.7 (17) 15% yoy drop in CPO average
price and 18% drop in PKO
average price, offset by a 1%
yoy increase in FFB production

EBIT 8.8 52.4 32.6 (38) 271 161.9 125.0 (23)

EBIT margin 11.1 43.3 31.9 32.9 30.7 YoY margin decline due to lower
(%) CPO prices

Net inc/(exp) (0.6) (1.5) (1.1) (25) 84 (3.7) (4.4) 18

Assoc. & JVs (0.7) 0.7 2.1 183 (406) 2.3 2.6 11

EI (7.7) - (10.5) Land compensation payment in

1QFY10 of RM2.8m and RM7.7m
impairment loss on JV incurred
in 4QFY10

Pretax profit 7.5 51.6 25.8 (50) 245 160.5 112.6 (30) Filtered down from weaker EBIT
and EI loss

Taxation 1.0 (13.1) (10.1) (23) n.m. (37.4) (33.0) (12)

Eff. rate (%) (13.6) 25.4 39.0 23.3 29.3 Higher due to non-deductibility
of EI loss and other expenses

MI (0.0) (0.0) (0.0) (81) 200 0.1 (0.2) n.m.

Net profit 8.5 38.5 15.7 (59) 85 123.2 79.5 (35) Filtered down from PBT and
higher effective tax rate

Core net 8.5 38.5 23.4 (39) 176 123.2 90.0 (27)
profit

EPS (sen) 1.3 5.2 2.0 (62) 47 19.3 11.1 (42)

Ave CPO 1,901 2,202 2,368 8 25 2,641 2,246 (15)

Price (RM/t)

FFB prodn (t) 145 186 141 (24) (3) 600 605 1 Due to 2.1% yoy increase in
matured area offset by 1.5%
yoy decline in FFB yield to
25.6t/ha

Source : Company, RHBRI estimates

Table 3. IJMP Earnings Forecasts Table 4. IJMP Forecast Assumptions

FYE Mar (RMm) FY10a FY11F FY12F FY13F FYE Mar FY11F FY12F FY13F

Turnover 406.7 506.3 557.7 533.3 FFB Produced (‘000 t) 617 639 632
Turnover growth (%) (17.3) 24.5 10.1 (4.4) CPO Production (‘000 t) 163 177 176
PKO Production (‘000 t) 24 25 25
Cost of Sales (222.3) (271.7) (301.6) (295.4) Average CPO price (RM/t) 2,550 2,600 2,500
Gross Profit 184.4 234.6 256.0 238.0

EBITDA 149.7 183.2 164.8 153.6

EBITDA margin (%) 36.8 36.2 29.5 28.8

Depreciation & (28.5) (32.1) (1.8) (1.8)

Amortisation
Net Interest (0.6) 5.5 6.7 3.6
Associates 2.6 2.6 2.6 2.6
Exceptional items 1.0 0.0 1.0 2.0

Pretax Profit 112.6 159.2 172.2 158.0

Tax (33.0) (39.8) (43.0) (39.5)
PAT 79.7 119.4 129.1 118.5
Minorities (0.2) (0.2) (0.2) (0.2)
Net Profit 79.5 119.2 128.9 118.3
Source: Company data, RHBRI estimates

Page 2 of 3

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com
 27 May 2010

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

Page 3 of 3

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com