RHB Equity 360° - 5 May 2010 (IOI, Digi, Sime Darby; Technical: Unisem)

Top Story : IOI Corp – Good news from property division
Visit Note
♦ Six key takeaways:
(1) FFB production weaker-than-expected;
(2) landbank planting progress on target;
(3) positive CPO price view;
(4) cost of production flat;
(5) manufacturing operations running at high utilisation rates, expansion completed; and
(6) good news from property division – in both Malaysia and Singapore.
♦ Despite weaker-than-expected FFB production caused by the dry weather in the first two months of the year, tree stress in its estates in Peninsular Malaysia, as well as mild labour shortage problems, which saw IOIC’s FFB production in 3QFY06/10 production falling 6.4% yoy, thus resulting in a YTD 9MFY06/10 FFB production decline of 9.1% yoy, we are more positive on IOIC’s earnings prospects after our recent visit. This is due to good news in the property development division, which is expected to see a 71% yoy rise in operating profits in FY10, on the back of recovery in the property markets in Malaysia as well as Singapore.
♦ All in, we have raised our forecasts by 2.9-13.6% for FY10-12. Post-earnings revision and after raising our target PE for property to 14x CY10 (from 13.5x previously) to be in line with the recently raised target PE for the sector, we have raised our SOP-based target price to RM6.85 (from RM6.65). Maintain Outperform.

RHB Equity 360° - 5 May 2010 (IOI, Digi, Sime Darby; Technical: Unisem)