Company Focus

IOI Corporation
Bloomberg: IOI MK | Reuters: IOIB.KL

Malaysia Equity Research PP 11272/04/2010(023521) 12 Aug 2009

FULLY VALUED RM5.12 KLCI : 1,186.28 Expect lower FX loss in 4QFY09

Price Target : 12-month RM 4.65 (Prev RM 4.40)
Reason for Report : 4QFY09 results preview • 4QFY09 FFB volume fell 17.1% y-o-y, but IOI may
Potential Catalyst: - book much lower translational FX loss
Analyst • FY09-10F net profit is raised by 18.1% and 2.4%
Malaysia Research Team +603 2711 2222 • Property segment valuation now based on RNAV;
general@hwangdbsvickers.com.my
TP raised to RM4.65; Maintain Fully Valued.

Still reeling from a wet 3QFY09. In 4QFY09, IOI’s own

FFB production slid from an already low 3QFY09 when
Price Relative heavy rains in Sabah hampered harvesting and washed
RM R e la tiv e In d e x
away pollen. We expect FFB yields to recover only in
1QFY10F, in line with seasonal peak productivity. Hence,
290
9 .0 0

for IOI, the 32% q-o-q jump in CPO prices in 4QFY09 was
8 .0 0
240
7 .0 0

6 .0 0
190
partially offset by lower volume. But margins for resource-
5 .0 0
based manufacturing should have normalized in 4QFY09.
4 .0 0 140

3 .0 0

2 .0 0 90 Lower FX losses expected. We understand that IOI has

2005 2006 2007 2008 2009
close to RM1b in outstanding forward FX sale contracts
IO I C o r p o r a t io n (L H S ) R e la t iv e K L C I IN D E X ( R H S )
from resource-based manufacturing. And since these were
sealed when the Ringgit was stronger, the recent
Forecasts and Valuation appreciation may not produce FX gains in 4QFY09.
FY Jun (RM m) 2008A 2009F 2010F 2011F However, the group should book translational FX gains q-
Turnover 14,665 14,462 15,318 16,899
o-q from its USD denominated debts. Reflecting this, FY09F
EBITDA 3,428 2,123 2,748 2,801 translational FX losses are cut to RM79m from RM246m.
Pre-tax Profit 3,095 1,779 2,356 2,414 Based on revised FY09F net profit of RM1,162m, 4QFY09
Net Profit 2,232 1,162 1,658 1,696 net profit should jump to RM666m.
Net Pft (Pre Ex.) 2,232 1,162 1,658 1,696
EPS (sen) 36.9 19.3 27.4 28.0 Property segment valuation revised. In our previous
EPS Pre Ex. (sen) 36.9 19.3 27.4 28.0
EPS Gth Pre Ex (%) 53 (48) 42 2 SOP valuation, IOI’s property segment was valued based on
Diluted EPS (sen) 36.2 18.9 27.0 27.6 8x PE. But we now believe this underestimates the market
Net DPS (sen) 14.8 8.1 10.6 10.8 value of the group’s Singapore property developments.
BV Per Share (sen) 136.7 131.5 148.1 164.1 Consequently, we changed to RNAV valuation
PE (X) 13.9 26.5 18.7 18.3 methodology to derive a revised target price of RM4.65.
PE Pre Ex. (X) 13.9 26.5 18.7 18.3
P/Cash Flow (X) 12.9 22.5 16.6 16.1
EV/EBITDA (X) 10.2 16.5 12.5 12.1 Reiterate Fully Valued rating. Despite the upgrade, we
Net Div Yield (%) 2.9 1.6 2.1 2.1 believe the stock price movement YTD has outpaced the
P/Book Value (X) 3.7 3.9 3.5 3.1 anticipated 43% rebound in FY10F earnings. Coupled with
Net Debt/Equity (X) 0.3 0.3 0.2 0.1 potential dilution from a rights issue, the stock price is
ROAE (%) 27.7 13.9 18.7 17.1 fundamentally demanding. We recommend waiting for a
Earnings Rev (%): 18.0 2.2 (1.3)
more attractive entry level.
Consensus EPS (sen): 21.9 27.4 30.2
At A Glance
ICB Industry : Consumer Goods Issued Capital (m shrs) 6,268
ICB Sector: Food Producers Mkt. Cap (RMm/US$m) 32,094 / 9,145
Principal Business: IOI is an integrated plantation, with one of the
Major Shareholders
highest yields in Malaysia, one of the largest oleochemical
manufacturing capacities in the world, and a growing land bank. Progressive Holdings (%) 39.2
Source of all data: Company, DBS Vickers, Bloomberg EPF (%) 9.3
Commonwealth Bank (%) 5.1
Free Float (%) 46.4
Avg. Daily Vol.(‘000) 10,009

HWANGDBS
Refer to important disclosures at the end of this report
 Company Focus
IOI Corporation
Investment summary
We reiterate our Fully Valued call for IOI with a revised
RM4.65 target price (proposed rights issue could reduce TP
to RM4.35). This mainly reflects a change in property
segment valuation based on RNAV, and higher contribution
from the group’s resource-based manufacturing segment,
although this is offset by lower plantation valuation due to
smaller planting in Indonesia and higher beta (based on 2-
year historical estimate taken from Bloomberg).
Despite our upgrade, we believe the counter has priced in
the anticipated 43% recovery in FY10F earnings. Our
recommendation is based on the following:
1. Limited growth until FY15F. IOI’s estates are almost fully
planted, which means there will be limited volume
growth and it could be prone to weather disruptions
like in 2HFY09. The group’s expansion into Indonesia
will not contribute meaningfully until FY15F. Between
FY10F and FY15F, IOI’s earnings growth is expected to
range between –3.1% and +6.3%.
2. Insignificant value-add from Singapore properties. The
group’s foray into the Singapore property market needs
resources that could otherwise be allocated to expand
its manufacturing business or for aggressive new
planting. In total, we estimate the Sentosa Cove
projects to add only RM73m to IOI’s value (assuming
selling prices of S$2,500-2,600 psf), based on c.RM5.4b
total project cost (IOI portion only).
3. Potential dilution from rights issue. The group had
previously been able to enhance shareholder value
through capital repayment, special dividend and share
buybacks. But its recent rights issue announcement will
now be dilutive. If we include the additional 421m new
shares, our target price would be reduced to RM4.35.
We did not include the group’s remaining US$600m
CB, as they are still comfortably out of the money given
the exercise price of RM11.00/share.
Forecasts revised
We made the following changes to our forecasts to account
for recent developments as well as changes to our property
assumptions:
1. Plantations. We understand that the group is scaling
down new planting in Indonesia to between 5,000 and
Page 2
7,000 ha in the current calendar year, from 10,000 ha
planned earlier. Hence, we lowered group FY10F new
planting assumption to 10,000 ha from 15,000 ha
previously, as we expect the group to expedite new
planting in 2H09 and 1H10F. We are retaining our
15,000 ha new planting assumption for FY11F.
2. Resource-based manufacturing. We understand that
EBIT/MT for most of the group’s resource-based
manufacturing businesses have recovered. While FY09F
assumptions are unchanged; we upgraded FY10F
refining sub-segment margin to 3.8% from 3%, and
specialty-fats margin to 10% from 9%. However, we
reduced capacity utilization rate for oleochemicals sub-
segment to 80% from 90%, as demand has not fully
recovered for this sub-segment.
3. Property. We revised our assumptions for selling prices
at the group’s Sentosa Cove projects from S$1,600 psf
to US$2,500 psf (Seascape – assumed to be launched in
CY10F), and from S$1,700 psf to S$2,600 psf (Pinnacle
– assumed to be launched in CY11F), in line with our
Singapore property analyst forecasts. We also changed
our valuation methodology for the group’s property
holdings to RNAV (applied 30% discount). This resulted
in the property fair value rising to RM0.65/share from
RM0.17/share (based on 8x CY10F PE).
Upside risk to plantation segment contribution
IOI’s FFB production in 4QFY09 fell 17% y-o-y, indicating
that yields have yet to recover following heavy rains in Sabah
in the last two quarters. With rains washing away pollen,
new flowers would still need c.6 months to bear fruit.
Assuming similar conditions prevail in most of Sabah, yield
recovery could be slower than normal.
While yields should recover over the next two quarters due
to seasonality, we understand that the recent dryness could
still result in smaller fruits. Based on a recent report by
NOAA, dry conditions are expected to continue for the
remainder of the year, peaking in Nov 09 and Feb 10.
Potentially higher CPO prices in 1HFY10F would lift IOI’s
selling prices. However, as we have seen, IOI may not
benefit fully by boosting volume.
HWANGDBS
 Company Focus
IOI Corporation

Valuation updated
After imputing lower FFB volume assumption for this quarter
and slower expansion in Indonesia, we cut our plantation
DCF value (WACC 10.6%, terminal growth rate 3%) by
16% to RM23.1b. To arrive at the DCF valuation, we
employed the group’s consolidated debts less property
segment debts. Based on 30% discount to RNAV, we now
value the group’s property segment (Malaysia and
Singapore) at RM5.7b.
We also raised EV/planted value of the group’s 33% stake in
BGA Group in Indonesia to US$9,000 from US$6,000, based
on average value of Indonesian estates EV/ planted.
These changes produced a revised target price of RM4.65.
Given the potential issue of additional 421m shares under its
recently proposed rights issue, our target price could be
lowered to RM4.35.

DCF valuation of plantations segment

Cost of debt WACC (%)
Tax rate 25.0% Equity portion of capital 85.4%
Kd 2.4% Ke 12.0%
Debt portion of capital 14.6%
Cost of equity Kd 2.4%
Risk free rate (Rf) 5.0% WACC 10.6%
Market return rate (Rm) 10.0%
Beta (ß) 1.4 Terminal value
Risk premium (Rm-Rf) 5.0% Implied perpetual growth rate 3.0%
Ke 12.0%

Free cash flow (RM m) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Operating profit 2,068.8 2,146.5 2,121.1 2,149.7 2,232.0 2,402.3 2,638.7 2,903.5 3,144.6 3,404.7 3,603.7
Tax -517.2 -536.6 -530.3 -537.4 -558.0 -600.6 -659.7 -725.9 -786.2 -851.2 -900.9
Op. profit after tax 1,551.6 1,609.9 1,590.9 1,612.3 1,674.0 1,801.8 1,979.0 2,177.6 2,358.5 2,553.5 2,702.8

Amortisation & depreciation 259.1 283.9 301.7 314.3 319.8 330.6 336.3 342.8 286.4 152.9 152.5
Gross cash flow 1,810.7 1,893.8 1,892.5 1,926.6 1,993.7 2,132.3 2,315.3 2,520.4 2,644.9 2,706.4 2,855.3

Capital expenditures -137.7 -164.2 -195.3 -216.8 -148.7 -91.3 -41.6 -34.6 -26.4 -26.5 -28.4
Incremental working capital -110.5 -265.3 -98.2 -143.2 95.6 -5.7 -10.5 -19.4 -24.4 -18.4 -19.3
Free cash flow 1,562.6 1,464.3 1,599.0 1,566.5 1,940.6 2,035.4 2,263.2 2,466.5 2,594.1 2,661.5 2,807.6
growth -6.3% 9.2% -2.0% 23.9% 4.9% 11.2% 9.0% 5.2% 2.6% 5.5%

PV of free cash flow 1,562.6 1,323.9 1,307.1 1,157.8 1,296.8 1,229.7 1,236.3 1,218.2 1,158.4 1,074.5 1,024.8
Total PV of free cash flow 13,590.0
PV of residual value 13,479.3
Corporate value 27,069.3
Shareholder value 23,110.8

Source: DBS Vickers estimates

Page 3
HWANGDBS
 Company Focus
IOI Corporation

RNAV of property segment

Fair mkt Fair mkt
Dev. properties - Malaysia Usage Land area Land area Land area value value NBV
(ha.) (acres) (sf) (RMm) (RM/sf) (RMm)
100% Lot 281, Bandar KL Future dev. land 1.5 3.8 163,934 98.4 600.0 50.6
100% Bandar Puchong Jaya A, Petaling Mix dev. Project 4.0 9.9 430,556 21.5 50.0 1.3
100% Bandar Puchong Jaya B, Petaling Mix dev. Project 25.0 61.8 2,690,973 134.5 50.0 117.9
100% Bandar Puteri, Petaling Mix dev. Project 98.0 242.2 10,548,616 527.4 50.0 280.1
100% IOI Resort, Sepang Condo & bungalow 14.0 34.6 1,506,945 37.7 25.0 48.8
100% Dengkil, Sepang Fuuture dev. land 217.0 536.2 23,357,650 280.3 12.0 177.0
100% Bandar Putra, Senai-Kulai Mix dev. Project 808.0 1,996.6 86,972,262 608.8 7.0 306.1
100% Tanjung Tokong, Penang Residential dev. 1.8 4.4 189,628 28.4 150.0 15.3
100% Desaria, Penang Residential dev. 21.0 51.9 2,260,418 45.2 20.0 4.7
100% Taman Lagenda Putra, Senai-Kulai Mix dev. Project 37.0 91.4 3,982,641 89.8 22.6 89.8
100% Taman Kempas Utama, JB Mix dev. Project 47.0 116.1 5,059,030 101.4 20.0 101.4
100% Others Various 1,646.1 4,067.7 177,188,568 157.3 0.9 157.3
2,920.4 7,216.5 314,351,219 2,130.8 1,350.3

Net saleable Total land Effective fair Effective

Dev. properties - Singapore Usage area cost mkt value GDV GDC Surplus Surplus
(sf) RM (RMm) (RMm) (RMm) (RMm) (RMm)
50% Seascape, Sentosa Cove Residential dev. 320,893 1,101.3 702.6 1,908.6 1,604.7 304.0 152.0
65% Pinnacle, Sentosa View Residential dev. 572,240 2,628.5 1,629.2 3,540.9 3,663.0 -122.1 -79.4
893,133 2,331.8 5,449.5 5,267.7 72.6

Net Net
leaseable leaseable Net leaseable Fair mkt Fair mkt
Investment properties Usage area area area value value NBV
(sqm) (acres) (sf) (RMm) (RM/sf) (RMm)
100% IOI Mall Puchong Retail 58,507 14 629,764 377.9 600.0 260.0
100% IOI Business Park Puchong 37 commercial lot 34,111 8 367,168 165.2 450.0 25.4
100% One & Two IOI Square 12-story office 30,969 8 333,348 150.0 450.0 113.0
100% IOI Plaza Singapore 12 storey office 8,658 2 93,194 200.9 2,155.5 270.6
100% IOI Resort Sepang Hotel & office 60,000 15 645,835 119.0 184.3 119.0
100% IOI Resort Putrajaya 33 res. bungalows 24,718 6 266,062 75.0 281.9 75.0
100% IOI Mall, Bandar Putra Kulai 3 storey retail 22,642 6 243,716 61.6 252.8 61.6
100% Others Various 1,962,365 485 21,122,721 117.3 122.1
2,201,970 544 23,701,808 1,266.9 1,046.8

Fair mkt value of property assets 5,729.5

Discount applied 30.0%
Shares in issue (net of treasury) 6,150.4
Fair mkt value/IOI share 0.65
Source: Company, DBS Vickers

SOP valuation
Planted Valuation Value Value
hectareage method RM m RM/share

Plantation & resource-based manufacturing DCF 23,110.8 3.76

Properties RNAV 4,010.7 0.65
33% stake in BGA 65,300.0 US$9k EV/ha 646.2 0.11

Add: Cash (consolidated) - end 03/09 2,515.6 0.41

Less: Debts (net of plantation & mfg) - end 03/09 1,765.3 0.29

SOP valuation 28,517.9 4.65

Number of shares (m) 6,150.4
Source: DBS Vickers estimates

Page 4
HWANGDBS
 Company Focus
IOI Corporation

Peer comparison

10F planted Adjusted Adjusted 10F Target

Land bank (own) Share price Market cap plantation EV EV/planted Rec. price Basis
(hectares) (hectares) per 11/08/09 (m) (m) (own)
Indonesia
Astra Agro Lestari N/A 256,159 Rp 22,150 US$ 3,507 US$ 3,395 US$ 13,253 Hold Rp 16,525 DCF
London Sumatra* 134,499 103,476 Rp 7,650 US$ 1,032 US$ 1,000 US$ 9,668 Hold Rp 6,650 DCF

Malaysia
Genting Plantations 164,264 78,437 RM 5.89 US$ 1,270 US$ 905 US$ 11,535 Fully Valued RM 5.15 DCF
IJM Plantations 63,490 30,120 RM 2.80 US$ 512 US$ 498 US$ 16,548 Fully Valued RM 2.30 DCF
IOI Corporation** 220,593 192,397 RM 5.12 US$ 8,596 US$ 4,018 US$ 20,884 Fully Valued RM 4.65 SOP
KL Kepong 244,857 221,934 RM 12.78 US$ 3,888 US$ 2,624 US$ 11,825 Buy RM 13.80 DCF
Sime Darby 553,786 540,810 RM 8.31 US$ 14,230 US$ 8,051 US$ 14,887 Sell RM 6.00 SOP
TH Plantation 29,211 29,802 RM 1.57 US$ 218 US$ 251 US$ 8,413 Hold RM 1.60 DCF
TSH Resources 82,841 21,181 RM 1.80 US$ 212 US$ 234 US$ 11,059 Fully Valued RM 1.65 DCF

Singapore
First Resources 263,115 94,076 S$ 0.96 US$ 976 US$ 1,045 US$ 11,109 Buy S$ 0.80 DCF
Indofood Agri R. 541,224 265,051 S$ 1.67 US$ 1,664 US$ 2,002 US$ 7,553 Buy S$ 1.75 DCF
Kencana Agri 174,979 26,828 S$ 0.31 US$ 214 US$ 234 US$ 8,733 Fully Valued S$ 0.24 DCF

* Including rubber and other crops

** Excluding effective stake in associates land bank
EPS PER (x)
FY07 FY08 FY09F FY10F FY11F FY07 FY08 FY09F FY10F FY11F
Indonesia
Astra Agro Lestari (Rp) 1,253 1,671 1,268 1,325 1,387 17.7 13.3 17.5 16.7 16.0
London Sumatra (Rp) 413 692 484 590 687 18.5 11.1 15.8 13.0 11.1
Simple average 18.1 12.2 16.6 14.8 13.6

Malaysia
Genting Plantations (sen) 45.5 49.3 32.4 33.7 33.6 13.0 11.9 18.2 17.5 17.5
IJM Plantations (sen) 8.0 22.3 19.2 14.3 17.9 34.9 12.6 14.6 19.6 15.7
IOI Corporation (sen) 24.1 36.9 19.3 27.4 28.0 21.2 13.9 26.5 18.7 18.3
KL Kepong (sen) 65.0 97.5 48.8 69.5 71.6 19.7 13.1 26.2 18.4 17.9
Sime Darby (sen) 39.7 58.4 30.5 39.3 39.9 20.9 14.2 27.2 21.2 20.8
TH Plantation (sen) 12.6 17.2 13.0 14.1 14.5 12.5 9.1 12.1 11.2 10.9
TSH Resources (sen) 23.0 14.5 12.7 12.3 16.2 7.8 12.4 14.2 14.6 11.1
Simple average 18.6 12.5 19.9 17.3 16.0

Singapore
First Resources (Rp) 294 743 546 625 706 22.5 8.9 12.1 10.6 9.4
Indofood Agri (Rp) 614 549 772 843 969 18.7 20.9 14.9 13.6 11.9
Kencana Agri (US cents) 3.9 1.0 1.2 1.6 2.6 5.5 20.8 18.3 13.3 8.4
Simple average 23.5 17.1 16.0 13.7 11.3

ROE (%) Dividend yield (%)

FY07 FY08 FY09F FY10F FY11F FY07 FY08 FY09F FY10F FY11F
Indonesia
Astra Agro Lestari 58.0 57.1 35.8 32.7 30.5 1.9 4.4 3.3 3.8 4.0
London Sumatra 30.8 33.7 19.2 20.5 20.5 1.0 2.0 3.0 4.0 5.0

Malaysia
Genting Plantations 18.0 16.9 10.1 9.8 9.0 1.7 1.9 1.2 1.3 1.3
IJM Plantations 7.7 20.6 15.3 10.8 12.5 1.3 3.5 2.9 1.6 1.3
IOI Corporation 21.5 27.7 13.9 18.7 17.1 1.0 2.9 1.6 2.1 2.1
KL Kepong 14.7 19.9 9.4 12.9 12.5 2.9 4.3 2.0 2.8 2.9
Sime Darby n/a 18.0 8.5 10.7 10.3 0.0 5.7 1.8 2.4 2.4
TH Plantation 34.1 28.0 13.2 11.9 11.5 4.0 5.5 4.1 4.5 4.6
TSH Resources 17.4 9.3 7.9 7.3 9.1 2.8 3.6 2.8 1.4 1.4

Singapore
First Resources 20.6 29.6 17.8 17.4 16.9 0.0 1.4 0.0 0.0 0.0
Indofood Agri 17.9 10.5 13.2 12.6 12.8 0.0 0.0 0.0 0.0 0.0
Kencana Agri 61.6 10.9 10.2 12.7 17.3 0.4 1.4 0.0 0.0 0.0

Page 5
HWANGDBS
 Company Focus
IOI Corporation

Peer comparison (continued)

P/BV (x) Net gearing (%)
FY07 FY08 FY09F FY10F FY11F FY07 FY08 FY09F FY10F FY11F
Indonesia
Astra Agro Lestari 8.6 6.8 5.8 5.2 4.6 NC NC NC NC NC
London Sumatra 4.5 3.2 2.9 2.5 2.1 9.4% NC NC NC NC

Malaysia
Genting Plantations 2.2 1.9 1.8 1.6 1.5 NC NC NC NC NC
IJM Plantations 2.5 2.3 2.2 2.1 1.9 13.0% NC NC NC NC
IOI Corporation 4.1 3.7 3.9 3.5 3.1 9.5% 24.7% 25.6% 17.9% 12.8%
KL Kepong 2.8 2.5 2.5 2.3 2.2 10.0% 9.8% 9.8% 7.4% 5.1%
Sime Darby 2.9 2.3 2.3 2.2 2.1 2.2% NC 4.8% NC NC
TH Plantation 3.8 1.9 1.4 1.3 1.2 NC NC NC NC NC
TSH Resources 1.2 1.1 1.1 1.0 1.0 23.6% 37.8% 40.6% 42.3% 41.1%

Singapore
First Resources 3.0 2.3 2.0 1.7 1.5 11.1% 17.6% 15.1% 6.7% NC
Indofood Agri 0.0 0.0 0.0 0.0 0.0 37.1% 35.1% 37.1% 32.3% 26.9%
Kencana Agri 2.7 1.9 1.8 1.6 1.3 26.9% 15.1% 16.2% 13.0% 4.7%
Source: DBS Vickers estimates

Page 6
HWANGDBS
 Company Focus
IOI Corporation

Income Statement (RM m) Balance Sheet (RM m)

FY Jun 2008A 2009F 2010F 2011F FY Jun 2008A 2009F 2010F 2011F
Turnover 14,665 14,462 15,318 16,899 Net Fixed Assets 4,519 4,603 4,656 4,677
Cost of Goods Sold (10,705) (11,747) (11,859) (13,311) Invts in Associates & JVs 542 560 610 662
Gross Profit 3,960 2,715 3,459 3,588 Other LT Assets 4,700 5,457 5,473 5,662
Other Opng (Exp)/Inc (788) (837) (1,021) (1,122) Cash & ST Invts 2,889 2,021 2,992 3,598
Operating Profit 3,172 1,878 2,438 2,466 Inventory 2,448 2,049 2,069 2,322
Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 1,693 1,772 1,877 2,071
Associates & JV Inc 46 18 50 51 Other Current Assets 470 451 460 469
Net Interest (Exp)/Inc (123) (117) (132) (104) Total Assets 17,261 16,913 18,137 19,460
Exceptional Gain/(Loss) 0 0 0 0
Pre-tax Profit 3,095 1,779 2,356 2,414 ST Debt 1,097 1,090 1,090 1,090
Tax (683) (545) (596) (612) Other Current Liab 1,313 1,633 1,647 1,828
Minority Interest (181) (72) (103) (105) LT Debt 4,867 4,166 4,207 4,217
Preference Dividend 0 0 0 0 Other LT Liabilities 628 640 653 666
Net Profit 2,232 1,162 1,658 1,696 Shareholder’s Equity 8,391 8,347 9,400 10,414
Net Profit before Except. 2,232 1,162 1,658 1,696 Minority Interests 965 1,037 1,140 1,245
EBITDA 3,428 2,123 2,748 2,801 Total Cap. & Liab. 17,261 16,913 18,137 19,460

Sales Gth (%) 63.8 (1.4) 5.9 10.3 Non-Cash Wkg. Capital 3,298 2,640 2,759 3,033
EBITDA Gth (%) 39.8 (38.1) 29.4 1.9 Net Cash/(Debt) (3,075) (3,235) (2,305) (1,710)
Opg Profit Gth (%) 54.1 (40.8) 29.9 1.1
Net Profit Gth (%) 50.6 (47.9) 42.6 2.3
Effective Tax Rate (%) 22.1 30.6 25.3 25.4
Cash Flow Statement (RM m) Rates & Ratio
FY Jun 2008A 2009F 2010F 2011F FY Jun 2008A 2009F 2010F 2011F
Pre-Tax Profit 3,095 1,779 2,356 2,414 Gross Margins (%) 27.0 18.8 22.6 21.2
Dep. & Amort. 210 227 259 284 Opg Profit Margin (%) 21.6 13.0 15.9 14.6
Tax Paid (683) (545) (596) (612) Net Profit Margin (%) 15.2 8.0 10.8 10.0
Assoc. & JV Inc/(loss) (46) (18) (50) (51) ROAE (%) 27.7 13.9 18.7 17.1
Chg in Wkg.Cap. (1,274) 640 (111) (265) ROA (%) 14.4 6.8 9.5 9.0
Other Operating CF 75 19 (9) (9) ROCE (%) 17.2 8.3 11.5 10.8
Net Operating CF 1,377 2,101 1,850 1,760 Div Payout Ratio (%) 40.6 44.2 40.6 40.6
Capital Exp.(net) (290) (311) (312) (305) Net Interest Cover (x) 25.8 16.1 18.4 23.8
Other Invts.(net) (139) 0 0 0 Asset Turnover (x) 0.9 0.8 0.9 0.9
Invts in Assoc. & JV (215) 0 0 0 Debtors Turn (avg days) 36.0 43.7 43.5 42.6
Div from Assoc & JV 0 0 0 0 Creditors Turn (avg days) 34.2 41.5 46.5 44.1
Other Investing CF (1,427) (756) (17) (189) Inventory Turn (avg days) 65.7 64.9 64.8 61.5
Net Investing CF (2,072) (1,067) (328) (494) Current Ratio (x) 3.1 2.3 2.7 2.9
Div Paid (315) (945) (604) (683) Quick Ratio (x) 1.9 1.4 1.8 1.9
Chg in Gross Debt 2,333 (708) 41 10 Net Debt/Equity (X) 0.3 0.3 0.2 0.1
Capital Issues (1,244) (262) 0 0 Net Debt/Equity ex MI (X) 0.4 0.4 0.2 0.2
Other Financing CF 81 13 13 13 Capex to Debt (%) 4.9 5.9 5.9 5.8
Net Financing CF 855 (1,902) (551) (660) Z-Score (X) 4.2 4.2 4.3 4.5
Net Cashflow 161 (868) 971 606 N. Cash/(Debt)PS (sen) (50.1) (51.0) (36.3) (26.9)
Opg CFPS (sen) 43.8 24.3 32.4 33.4
Free CFPS (sen) 17.9 29.7 25.4 24.0
Quarterly / Interim Income Statement (RM m) Segmental Breakdown / Key Assumptions
FY Jun 4Q2008 1Q2009 2Q2009 3Q2009 FY Jun 2008A 2009F 2010F 2011F
Turnover 4,560 4,655 3,727 3,096 Revenues (RM m)
Cost of Goods Sold N/A N/A N/A N/A Plantation 236 327 293 298
Gross Profit N/A N/A N/A N/A Property 826 607 637 934
Other Oper. (Exp)/Inc N/A N/A N/A N/A Resource-based 13,479 13,402 14,260 15,536
Operating Profit 1,029 489 386 198 Others 124 126 129 131
Other Non Opg (Exp)/Inc N/A N/A N/A N/A
Associates & JV Inc 3 13 (13) (10) Total 14,665 14,462 15,318 16,899
Net Interest (Exp)/Inc (39) (39) (39) (46) EBIT (RM m)
Exceptional Gain/(Loss) N/A N/A N/A N/A Plantation 1,836 1,624 1,332 1,282
Pre-tax Profit 994 463 333 141 Property 552 261 240 242
Tax (200) (141) (151) (83) Resource-based 658 196 737 865
Minority Interest (59) (31) (14) (21) Others 126 (203) 129 78
Net Profit 735 291 169 37
Net profit bef Except. 735 291 169 37 Total 3,172 1,878 2,438 2,466
EBITDA 1,069 558 426 249 EBIT Margins (%)
Plantation 66.1 64.0 58.8 55.5
Sales Gth (%) 29.3 2.1 (19.9) (16.9) Property 66.8 43.0 37.7 25.9
EBITDA Gth (%) 19.0 (47.8) (23.7) (41.5) Resource-based 4.9 1.5 5.2 5.6
Opg Profit Gth (%) 25.0 (52.5) (21.0) (48.7) Others N/A N/A N/A N/A
Net Profit Gth (%) 22.1 (60.5) (42.0) (77.8)
Gross Margins (%) 100.0 100.0 100.0 100.0 Total 21.6 13.0 15.9 14.6
Opg Profit Margins (%) 22.6 10.5 10.4 6.4 Key Assumptions
Net Profit Margins (%) 16.1 6.2 4.5 1.2 CPO price (RM/MT) 2,582.2 2,300.0 2,315.0 2,300.0
Mature palm oil hectarage 139,097. 137,616. 137,940. 139,558.
CPO sales volume (MT) 848,119. 777,312. 835,192. 853,690.
Oleochem revenue (RMm) 2,557.3 2,385.2 2,385.2 2,436.8
Average MYR/USD 3.3 3.5 3.6 3.5
Source: Company, DBS Vickers

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 Company Focus
IOI Corporation

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