Expect better earnings delivery in 4QFY22
3QFY22 core PATMI missed our/ consensus expectations mainly on lowerthan-expected CPO ASP achieved and higher-than-expected taxes. We
expect 4QFY22 to be better QoQ driven mainly by stronger upstream
earnings (on higher output and ASP). Following our EPS revisions, IOI
remains a BUY with unchanged TP of MYR4.87 on 22x CY23E EPS, at -1SD
of 5Y mean.
3Q core PATMI missed expectations
3QFY22 core PATMI of MYR351m (-19% YoY, -26% QoQ) brings 9MFY22 core
PATMI to MYR1,112m (+29% YoY) which met just 63%/64% of our/consensus
full-year estimates. Despite higher 3Q CPO ASP achieved of MYR5,064/t
(+58% YoY, +11% QoQ), it was 10% below benchmark 3M FCPO price, which
implies IOI had forward sold a portion of its output much earlier. And its
3Q group effective tax rate was also high at 32% on Cukai Makmur. To a
lesser extent, 3Q core results were also dragged by net inventory write
down (MYR20m) and FV loss on other investments (MYR18m).
Operationally, 3Q’s upstream EBIT rose 160% YoY to MYR416m (-20% QoQ)
mainly on higher CPO ASP and FFB output (+9% YoY, -22% QoQ).
Absence of Loder’s one-off gain reported last year
As for its downstream ops, 3Q EBIT weakened to MYR46m (-57% YoY, -75%
QoQ) despite higher revenue (+44% YoY, -1% QoQ) as refining margins fell
(but mitigated by better oleo contribution). 3Q performance was also
dragged by a FV loss on derivatives of MYR17m (3QFY21 FV gain: MYR43m,
2QFY22 FV gain: MYR55m). As for associates, contributions fell to MYR84m
(-76% YoY, +143% QoQ) mainly due to the absence of a share of Loder’s
one-off gain on sales of its refinery (MYR268m) reported in 3QFY21.
FY23E core PATMI cut by 9%
Following the weaker 3QFY22 results, we cut our FY22E core PATMI by 9%
mainly to factor in lower net CPO ASP of MYR4,768/t (-5%) and higher
effective taxes of 30% (from 28%) for FY22E. We make no changes to our
FY23E-24E core PATMI forecasts.