BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2013(031743)

Thursday, 31 May, 2012

Result Review

IOI Corporation
Inline
Stock Data
Bloomberg Ticker Market Cap (RM'mn) Issued shares (mn) 52-week high 52-week low 3-mth avg daily volume ('00) Free Float Shariah Compliant IOI MK 33,456 6,397 5.60 3.75 33,852 44.67 Y Altman Z-score 5.06 YTD price chg (2.79) YTD KLCI chg 2.90 Beta 1.04 Major Shareholders Progressive Hldgs 42.40% EPF 11.81% Vanguard Group 2.05% 1mth 0.19 (0.10) 3mth (1.87) (3.49) 12mth 2.36 (2.98)

BUY
Price: RM5.23 Target Price: (+18.5%)RM6.20
IOI Corp 3QFY12 revenue of RM3.58bn is 17.5% lower YoY mainly due to lower FFB production and lower property development sales recognised. Net profit also dropped 16.0% on the back of lower revenue and higher production costs. However, its bottomline was buoyed by higher contribution from the property investment division. Net margin is improving from the low of 6.2% in 1QFY12 to 13.9% in 2QFY12 and to 15.4% for the current quarter. Overall figures are largely in line hence, we are maintaining our earnings estimates. We have revised up our target price marginally to RM6.20 from RM6.15 previously on a rolling PE basis. Maintain Buy. Lower revenue and profit. IOI Corps revenue plunged 17.5% y-o-y to RM3.58bn due mainly to lower FFB production and lower property development revenue recognised. FFB production for the quarter dropped 4.6% to 644,984 tonnes as compared to 676,197 tonnes achieved in 3QFY11. Net profit dropped 16.0% to RM552.0m on lower revenue and higher cost of production. Nonetheless, its bottomline is cushioned by higher contribution from the property investment division. We note that its profit margin is on the uptrend since the low in 1QFY12. Net margin rose from 6.2% in 1QFY12 to 13.9% in 2QFY12. In 3QFY12, net margin improve further to 15.4%. 9M revenue flat. Cumulative 9 months revenue of RM11.89bn is a 0.5% increase from RM11.83bn. Despite the nominal improvement, net profit plunged 17.2% to RM1.41bn from RM1.74bn achieved in 9MFY11. The large discrepancy is mainly due to translation loss on foreign currency denominated borrowings of RM93.3m versus a gain of RM250.8m previously. Excluding the translation impact, net profit has actually risen by 4.0%. Forecast. The Groups 3QFY12 results are largely in line with our expectation. Hence, we are maintaining our earnings estimates. View and Valuation. By applying a 3-year average P/E ratio of 17.8x to the rolling next 12 months EPS estimates of approximately 35.0 sen, we raised our target price slightly to RM6.20 from RM6.15 previously. Maintain Buy with an upside potential of over 18.0%.

Improving margin

Share Performance (%)

Absolute vs. KLCI

Financial Highlights
FYE 30 Jun 2010 2011 2012E 2013E 2014E FFB Prod. ('000 mt) 3,405.1 3,295.5 3,392.3 3,423.4 3,595.1 Turnover 12,386.5 16,020.0 16,732.4 17,836.0 18,436.6 EBIT 2,738.8 2,986.4 3,068.1 3,182.5 3,214.3 Pretax profit 2,550.6 2,863.6 2,896.7 2,990.6 3,010.7 Net Profit 2,035.7 2,222.9 2,177.6 2,248.1 2,190.3 EPS (sen) 32.96 34.75 33.89 34.99 34.09 Gross DPS (sen) 17.00 17.00 17.90 18.10 18.00 Div Yield (%) 3.25 3.25 3.42 3.46 3.44 NTA/share (RM) 1.61 1.79 1.95 2.12 2.28 PE Ratio 15.87 15.05 15.43 14.95 15.34 EBIT Margin Pretax Margin Effective tax rate ROE ROA Net Gearing (x) 22.11% 20.59% 19.04% 20.52% 12.22% 0.36 -7.14% -14.97% 59.17% 64.54% 106.98% 18.64% 17.88% 20.01% 19.06% 12.02% 0.35 -3.22% 29.33% 9.04% 12.27% 9.20% 18.34% 17.31% 22.50% 17.22% 10.69% 0.35 2.94% 4.45% 2.74% 1.16% -2.04% 17.84% 16.77% 22.50% 16.57% 10.25% 0.32 0.91% 6.60% 3.73% 3.24% 3.24% 17.43% 16.33% 25.00% 14.97% 9.29% 0.30 5.02% 3.37% 1.00% 0.67% -2.58%

Growth Ratios
FFB Turnover EBIT Pretax profit Net profit

Share Price Chart

5.7 5.5 5.3 5.1 4.9 4.7 4.5 4.3 4.1 Jul-11

Ng Keat Yung nkyung@bimbsec.com.my 03-26918887 ext 181

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31 May 2012

Results Review: IOI Corp 3QFY12

Quarterly figures
FYE 30 Jun (RM'm) Revenue EBIT Pretax profit Taxation Minority interest Net Profit EPS (sen) Net gearing (x) EBIT margin (%) PBT margin (%) Net margin (%) Effective tax rate (%) Mar-11 4,340.3 827.5 780.9 -110.4 -13.8 656.7 10.25 0.15 19.07 17.99 15.13 14.13 Jun-11 4,324.2 763.3 731.7 -178.0 -5.9 547.8 8.54 0.21 17.65 16.92 12.67 24.33 Sep-11 4,147.6 458.2 424.1 -151.3 -14.7 258.1 4.02 0.20 11.05 10.23 6.22 35.68 Dec-11 4,165.9 805.2 766.8 -174.8 -14.4 577.7 8.99 0.42 19.33 18.41 13.87 22.79 Mar-12 QoQ Chg YoY Chg 3,579.3 -14.1 -17.5 696.3 -13.5 -15.9 659.3 -14.0 -15.6 -110.1 -37.0 -0.2 2.7 NM NM 552.0 -4.5 -16.0 8.59 -4.4 -16.2 0.26 -38.5 69.9 19.45 0.6 2.0 18.42 0.1 2.4 15.42 11.2 1.9 16.70 -26.7 18.2 9MFY11 11,830.0 2,223.1 2,131.9 -395.1 -61.8 1,675.1 26.2 0.26 18.79 18.02 14.16 18.53 9MFY12 11,892.8 1,959.7 1,850.3 -436.2 -26.4 1,387.7 21.6 0.15 16.48 15.56 11.67 23.57 YTD Chg 0.5 -11.8 -13.2 10.4 -57.3 -17.2 -17.6 -41.1 -12.3 -13.7 -17.6 27.2

Source: BIMB Securities

Income Statement
FYE 30 Jun (RM'm) Revenue EBITDA Pretax profit Tax MI Net profit Net profit growth (%) EPS (sen) EPS growth (%) Gross DPS (sen) Dividend yield (%) NTA/share (RM) Net gearing (x) PER (x) P / NTA (x) ROE (%) ROA (%) 2009 14,568.0 2,682.5 1,550.1 (486.9) (79.7) 983.5 -55.9 16.1 -54.9 7.8 1.48 1.28 0.35 32.42 4.10 10.85 5.92 2010 12,386.5 1,723.8 2,550.6 (485.5) (29.5) 2,035.7 107.0 33.0 104.3 17.0 3.25 1.61 0.36 15.87 3.25 20.52 12.22 2011 16,020.0 2,422.4 2,863.6 (573.1) (67.6) 2,222.9 9.2 34.8 5.4 17.0 3.25 1.79 0.35 15.05 2.92 19.06 12.02 2012E 16,732.4 3,249.0 2,896.7 (651.8) (67.3) 2,177.6 -2.0 33.9 -2.5 17.9 3.42 1.95 0.35 15.43 2.69 17.22 10.69 2013E 17,836.0 3,475.5 2,990.6 (672.9) (69.5) 2,248.1 3.2 35.0 3.2 18.1 3.46 2.12 0.32 14.95 2.47 16.57 10.25 2014E 18,436.6 3,537.1 3,010.7 (752.7) (67.7) 2,190.3 -2.6 34.1 -2.6 18.0 3.44 2.28 0.30 15.34 2.30 14.97 9.29

Source: BIMB Securities

Balance Sheet
FYE 30 Jun (RM'm) Current assets Non-current assets Total Assets Current liabilities Non-current liabilities Shareholders' fund Minority interest Equity & liabilities 2009 6,007.3 9,974.6 15,982.0 1,277.2 5,932.4 8,346.3 426.2 15,982.0 2010 7,160.1 10,183.3 17,343.4 1,432.6 4,841.3 10,780.2 289.3 17,343.4 2011 7,703.1 11,952.0 19,655.1 2,288.0 5,105.7 11,999.2 262.2 19,655.1 2012E 8,339.6 12,736.9 21,076.5 1,687.2 6,068.4 13,026.7 294.1 21,076.5 2013E 9,223.9 13,579.7 22,803.5 1,802.0 6,562.0 14,112.0 327.7 22,803.5 2014E 9,845.4 14,513.1 24,358.5 1,734.2 7,119.7 15,145.7 358.8 24,358.5

Source: BIMB Securities

www.bimbsec.com.my

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31 May 2012
DEFINITION OF RATINGS BIMB Securities uses the following rating system:

Results Review: IOI Corp 3QFY12

STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months OUTPERFORM The stock is expected to perform ahead of the market in the next 12 months TRADING BUY The stock is expected to outperform the market in the next 3 months NEUTRAL The stock is expected to perform in line with the market in the next 12 months TRADING SELL The stock is expected to underperform the market in the next 3 months SELL An expected price depreciation of more than 10% in the next 12 months SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB Securities SdnBhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities SdnBhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

www.bimbsec.com.my

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