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Wednesday, May 18, 2011

KLCI Stock - IOICORP / 1961 - 2011 Quarter 3

Company Info
Market Capital (Capital Size)33,286,217,041 (Very Large)
Par ValueRM 0.10

My Analysis
Forecast P/E now(5.19-0.18)/0.352 = 14.23 (Moderate)
Target Price5.63+0.18 = 5.81 (PE 16.0, EPS 0.352, DPS 0.18)
DecisionBUY
Comment
Revenue increased 9.3% and is third consecutive quarter increasing and also higher than preceding year corresponding quarter 37.9%, eps increased 21% and is second consecutive quarter increasing and also higher than preceding year corresponding quarter 40.6%, cash generated from operating is not enough to cover financing activities, better liquidity ratio at strong level now, better gearing ratio at moderate level now, all accounting periods are good, CPO price decreasing slow down, inventory increasing which expect better contribution
First Support Price5.2
Second Support Price5.0
Risk RatingMODERATE

Research House
ECM Target Price5.94 (2011-02-17)
Maybank Target Price6.35 (2011-02-17)
MIDF Target Price6.81 (2011-02-17)
TA Target Price6.63 (2011-04-01)
CIMB Target Price5.95 (2011-04-07)
HLG Target Price5.9 (2011-04-07)
Kenanga Target Price5.63 (2011-04-11)
RHB Target Price5.6 (2011-04-11)
OSK Target Price4.41 (2011-04-12)

Accounting Ratio
Return on Equity18.80%
Dividend Yield3.47%
Profit Margin17.42%
Tax Rate14.59%
Asset Turnover0.8188
Net Asset Value Per Share1.76
Net Tangible Asset per share1.68
Price/Net Tangible Asset Per Share3.09
Cash Per Share0.48
Liquidity Current Ratio5.7438
Liquidity Quick Ratio3.6163
Liquidity Cash Ratio2.2482
Gearing Debt to Equity Ratio0.5816
Gearing Debt to Asset Ratio0.3623
Working capital per thousand Ringgit sale44.0%
Days to sell the inventory88
Days to collect the receivables42
Days to pay the payables33

My notes based on 2011 quarter 3 report (number in '000):-
- The higher profit is due mainly to increase in overall operating profit of the group, as well as increased contribution from jointly controlled entities as compared to Q3 FY2010

- The plantation segment reported a 16% increase in operating profit to RM328.2 million for Q3 FY2011 as compared to RM282.0 million for Q3 FY2010. The higher operating profit achieved is due to higher CPO and PK prices partially offsetted by lower FFB production. Average CPO and PK prices realised for Q3 FY2011 were RM3,019/MT and RM2,772/MT compared to RM2,480/MT and RM1,331/MT for Q3 FY2010

- The resource-based manufacturing segment reported an operating profit of RM184.5 million for Q3 FY2011 as compared to RM128.6 million in Q3 FY2010. After excluding the changes in fair value on derivative contracts which amounted to a gain of RM99.1 million during Q3 FY2011, the results of the resource-based manufacturing segment is lower than Q3 FY2010, due mainly to lower margins from speciality fats and oleochemicals

- The property segment’s operating profit of RM137.3 million for Q3 FY2011 is 10% higher than the profit reported for Q3 FY2010, mainly due to compensation of RM22 million received in respect of compulsory acquisition of land

- The plantation segment’s profit of RM1,037.3 million for Q3 YTD FY2011 is 22% higher than
RM851.7 million reported for Q3 YTD FY2010, contributed by higher CPO and PK prices realised
partially offsetted by lower FFB production

- The plantation segment reported a 10% decrease in operating profit to RM328.2 million for Q3 FY2011 as compared to RM363.7 million for Q2 FY2011, mainly due to lower FFB production as Q3 is traditionally a low crop season for oil palm

- Operating profit from the property segment for Q3 FY2011 of RM137.3 million is lower than the preceding quarter by 28%, mainly due to non-recurring gain on disposal of investment properties of approximately RM61 million recognised in Q2 FY2011

- The resource-based manufacturing segment reported a profit of RM184.5 million in Q3 FY2011, 95% higher than Q2 FY2011, mainly due to fair value differences on outstanding derivative contracts. The segment reported a fair value gain on outstanding derivative contracts in Q3 FY2011 of RM99.1million whilst there was a fair value loss of RM72.7 million in Q2 FY2011

- Estimate next 4Q eps after 2011 Q3 result announced = 0.08*4*1.1 = 0.352(exclude RM126.1 million non-repeatable/other income), estimate PE on current price 5.78 = 19.02(DPS 0.18)
- Estimate next 4Q eps after 2011 Q2 result announced = 0.1472*2 = 0.2944, estimate highest/lowest PE = 19.06/16.98 (DPS 0.18)
- Estimate next 4Q eps after 2011 Q1 result announced = 0.09*4 = 0.36, estimate highest/lowest PE = 16.64/14.64 (DPS 0.17)
- Estimate next 4Q eps after 2010 Q4 result announced = 0.0828*4*1.05 = 0.3478, estimate highest/lowest PE = 16.79/14.32 (DPS 0.17)
- Estimate next 4Q eps after 2010 Q3 result announced = 0.0692*1.1*4 = 0.3045, estimate highest/lowest PE = 17.34/15.04 (DPS 0.09)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.0729*4 = 0.2916, estimate highest/lowest PE = 19.31/17.46 (DPS 0.09)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.0737*4 = 0.2948, estimate highest/lowest PE = 18.86/16.72 (DPS 0.07)

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