IOI Corp kick started FY25 with a core profit of RM302.5m after stripping out i) net foreign currency (FX) translation gain on foreign currency denominated borrowings and deposits (RM365.9m), ii) net fair value gain on derivative financial instruments (RM66.7m), iii) FX loss (RM31.1m), iv) fair value loss on other investments (RM10.2m), v) net gain arising from changes in fair value of biological assets (RM16.9m) and minority interests. The results were in line with our and the street's full-year expectations, accounting for 22.7% and 23.8%, respectively. Maintain Neutral with an unchanged SOP-based TP of RM4.33. No dividend was declared for the quarter.

• 1QFY25 revenue (QoQ: +5.3%, YoY: +21.3%). The group's revenue grew 21.3% YoY to RM2.6bn, mainly led by stronger downstream manufacturing sales (+22.5% YoY) while plantation sales were marginally lower. 1QFY25 Average CPO price climbed from RM3,789/mt to RM4,059/mt while 1QFY25 FFB production gained 3.5% YoY to 760,074mt. Oil extraction rate slipped from 21.82% to 21.35% while FFB yield increased from 5.04mt/ha to 5.37mt/ha. Resource-based manufacturing sales were up from RM2bn to RM2.5bn, led by higher sales volume from the oleochemical sub-segment, partially offset by lower refining sales volume.
• 1QFY25 core profit rose 1.2% YoY. Excluding the exceptional items, the group posted a higher core profit of RM302.5m, up 1.2% YoY, on the back of stronger plantation earnings, partially offset by weaker resource-based manufacturing earnings. Plantation earnings climbed 12.3% YoY to RM353.1m, attributed to lower production costs and better selling prices. Meanwhile, resource-based earnings dropped 33.3% YoY to RM37.6bn, dampened by lower margins from the refining sub-segment, partially mitigated by higher margins from the oleochemical sub-segment and better contribution from Bunge Loders Croklaan.
• Outlook. Management forecasts CPO price to remain high at above RM4,500/mt for the next 3 months, underpinned by tighter palm oil supplies as oil palm trees enter low production season. However, demand could be dampened by the high CPO price, which is trading at a premium over soybean oil price. For the plantation segment, the group's FFB production is projected to grow moderately in FY25, led by yield improvements in Peninsular Malaysia and increased FFB production from its maturing young palms in Sabah and Indonesia. Meanwhile, refining margins have improved following a higher CPO export tax imposed by the Malaysian government effective this month. However, the current high refined product prices could affect the buying interests. In the oleochemical sub-segment, the recovery in the North Asia market demand and the normalising freight and logistics are expectedly to have positive impact on its oleochemical segment.

Source: PublicInvest Research - 27 Nov 2024