IOI Corp poised to record stronger earnings in H2

PETALING JAYA: IOI Corp Bhd is expected to post robust earnings for the second half of its financial year ending June 30, 2021, driven by its plantation segment on rising crude palm oil (CPO) prices.

Following a strong performance for first half by the diversified conglomerate, with its net profit rising 75% year-on-year (y-o-y) to Rm633.6mil, analysts expected the momentum to continue into the remaining six months and raise their earnings forecasts for the group.

Maybank Investment Bank (Maybankib) Research revised its earnings forecasts for FY21-22 by 1% and 2%, respectively. This was based on the brokerage’s higher forecasts of average CPO prices for 2021-22 at RM2,700 and RM2,600 per tonne, compared with its previous forecast of RM2,500 per tonne for both years.

“We expect IOI to report better H2FY21 earnings from downstream and higher CPO average selling price to offset seasonally lower output,” it said.

Maybankib up its target price for IOI to RM4.87 from RM4.84 previously based on an unchanged FY21 price-earnings ratio (PER) of 31 times. It reiterated “buy” on the counter.

Kenanga Research also raised its FY21-22 earnings forecasts for IOI by 8% on higher CPO prices. The brokerage maintained its “outperform” call on the counter, with an unchanged target price of RM4.95 based on FY22 PER of 27 times.

Also reiterating “buy”, TA Research kept its target price for IOI unchanged at RM4.80 based on FY21 PER of 26 times.

CGS-CIMB Research maintained its “hold” rating on IOI with an unchanged sum-of-part based target price of RM4.68. The brokerage explained this was due to lower valuations accorded to IOI’S associates, which could offset the better earnings from the plantation division.

“We raise our FY21-23 core net profit forecasts by 16% to 22% to reflect our recently revised CPO price forecasts of RM2,900/RM2,700 per tonne for 2021/2022,” CGS-CIMB Research said in its report.