Stable earnings outlook projected for IOI’s 2QFY17

KUCHING: Stable earnings outlook has been projected for IOI Corporation Bhd’s (IOI) second quarter of financial year 2017 (2QFY17), with the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) expecting core net income to be in the range of RM250 million to RM280 million.

For IOI’s plantation division, MIDF Research expected it to register higher profit quarter on quarter (q-o-q) and year on year (y-o-y).

According to MIDF Research, against the previous quarter, 2QFY17 earnings improvement was mainly driven by higher crude palm oil (CPO) price based on Malaysian Palm Oil Board (MPOB) data which should offset lower fresh fruit bunch (FFB) production.

The research arm noted that against the same quarter last year, better CPO price (up 36 per cent y-o-y to RM2935 per MT) is expected to more than offset the 11 per cent decline in FFB volume.

“In FY16, plantation division is the biggest earnings contributor for IOI with operating profit of RM764 million (or 56 per cent of the group’s),” it said in a results preview.

Meanwhile, MIDF Research higlighted that among the three sub-divisions in resource based manufacturing (RBM) division, the oleochemical subdivision margin is likely to be affected by high price of palm kernel.

The research arm noted that for specialty oils and fats sub-division, its business should recover after the uplift of suspension from Roundtable on Sustainable Palm Oil (RSPO) certification from August 8, 2016 onwards.

Lastly, it expected refinery subdivision earnings to be flattish.

“All said, we think that RBM division earnings may weaken slightly but its earnings contribution is smaller as compared to plantation.

“In FY16, RBM division generated operating profit of RM590 million (or 43 per cent of the group’s),” the research arm said.