IOI has about 24,000ha of plantation landbank in Johor and 19,000ha in Pahang.
PETALING JAYA: IOI Corp Bhd
is currently evaluating potential landbank monetisation for some of its aged plantation land areas for renewable energy (RE) development, says RHB Research.
The research house said in a report that some that could be suitable would include a 2,000ha to 3,000ha land in Tangkak, Johor and 1,000ha in Pahang.
“The company could potentially rent the land as well as operate solar assets, either on its own or with a joint-venture partner,” it added.
Currently, IOI has about 24,000ha of plantation landbank in Johor and 19,000ha in Pahang.
On its plantation operation, IOI Corp recorded fresh fruit bunch (FFB) output growth at 5% in the 11 months of financial year 2024 (FY24), lower than its original FY24 growth target of 7% due to flooding in January in Sabah.
“Although the weather has normalised, IOI Corp is now expecting FFB growth in FY24 and FY25 to be around 5%.
“As this is in line with our projected 4% to 5% growth for FY24 to FY25, we make no changes to our forecasts,” RHB Research noted.
Meanwhile, the group’s unit cost came in at RM2,250 per tonne in the the first nine months of FY24.
“The company expects FY24 forecast cost to hover around the same level, translating to a 4% year-on-year (y-o-y) reduction,” said the research house.
IOI Corp has also secured its fertiliser requirements up to the first half of FY25 at flattish prices y-o-y versus FY24 fertiliser prices, which were about 20% to 30% lower y-o-y and is on track to achieve the application target for FY24.
“As such, the management also expects flattish crude palm oil unit costs for FY25.
“We adjust our cost forecasts upwards slightly to reflect this,” noted RHB Research.
Meanwhile, the group’s downstream operations are slowly showing margin improvement quarter-on-quarter, driven by positive performances from the refinery and oleochemical segments in the third quarter of this year (3Q24).
However, the utilisation rates for its refineries are still low at 50%, while oleochemical utilisation rates are around 60% in the nine months of 2024.
“Going forward, while IOI Corp expects the refinery sub-segment to still continue facing stiff competition from Indonesia, the oleochemical subsegment is improving as demand picks up, coming from restocking activities.
“As such, management expects margin to improve to 3% to 5% in 4Q24 from 2% to 3% in 3Q24. We make no changes to our more conservative margin assumptions of 1% for FY24 and 2% to 3% for FY25 to FY26,” the research house said.
RHB Research, which pegged IOI Corp as a laggard play trading at a discount to its peers, has maintained a “buy” call on the stock with a slightly lower target price of RM4.30, from RM4.40 previously.
“Although we expect FY24 to end the year flattish y-o-y, some improvement should be seen in FY25 as downstream earnings improve on global demand recovery.
“The stock valuation remains attractive,” it added.
