Best time to buy ioi shares? Any advice?

IOI集团（IOICORP，1961，主板种植股）日线股价趋势，于2月21日进入一段调整走势中，陷入一段短期调整趋势时，跌破4.72令吉后，以4.58令吉报收，按日跌15仙或3.17%，近期料会在4.43至4.57令吉间取得应有支撑。

21/2/19行情

闭市：4.58令吉

起落：-15仙

成交量：74,403宗

最高：4.70令吉

最低：4.51令吉

本益比：9.405倍

毛周息率：4.476%

52周最高：4.88令吉

52周最低：4.10令吉

IOI Corp posted a core net profit of RM382.7m for 1HFY19, making up only 44% and 39% of our and consensus expectations after stripping out i) total net foreign currency translation of RM83.9m on foreign currency denominated borrowings and deposits and ii) fair value gain on derivative financial instruments from the resource-based manufacturing segment amounting to RM38m. A lower DPS of 3.5sen (-22.2% YoY) was declared for the quarter. Despite the lower-than-expected results due to a sharp decline in CPO prices during Oct-Dec period, we keep our numbers unchanged as we see a potential catch-up in 2H following the recent strong recovery in CPO prices. Maintain Neutral call with an unchanged TP of RM4.04.

• 2QFY19 revenue (QoQ: +0.3%, YoY: -6.4%). Group revenue slipped 6.4% YoY to RM1.9bn, dragged by a decline in plantation and resource based manufacturing sales. Upstream plantation sales tumbled 49.8% YoY to RM41.5m, dragged by a decline in both FFB production and CPO selling prices. Average CPO price recorded in 2QFY19 was down from RM2,644/mt to RM1,932/mt, a sharp decline of 26.9% YoY. Meanwhile, FFB production dropped 3.3% YoY to 983,147mt. Resource-based manufacturing sales saw declined 4.7% YoY to RM1.8bn.

• 2QFY19 core net profit (QoQ: +14.7%, YoY: -26.1%). Core earnings dipped 26.1% YoY to RM200.6m. The weaker results were due to softer earnings contribution from upstream plantation segment, which was partly cushioned by stronger resource-based manufacturing sales. Plantation earnings tumbled 63.9% YoY to RM127.3m, attributed to higher cost of production and weaker CPO selling prices. On the other hand, resource-based manufacturing earnings surged 95.3% to RM121.5m on higher sales volume and margins from oleochemical and refining sub-segments. Earnings contribution from its 30%-owned Bunge Loders Croklaan jumped 48% YoY to RM45.7m.

• Prospects. Management expects to see favourable results from upstream plantation segment in the following quarter given the strong recovery in CPO prices despite seeing a seasonal drop in FFB production. Meanwhile, the palm kernel oil price, which is a key raw material for its oleochemical business, has not rebounded in line with the CPO price, which will bode well for its oleochemical sub-segment business. Lastly, its associate company, Bunge Loders Croklaan is also expected to perform well with higher sales volume in the confectionery and nutrition categories.

Oil Plantation Company Comparision (Top 30)

Part I - Top 10

Part II - 11-20

Part III - 21 - 30

IOICORP is worth to further look into evaluation, scoring 11/15 point in industry comparison for Plantation (Oil Palm)

Competitiveness - 5/5 point for having 10.81 % market share in 2018
Operational -5/5 for having operation margin ratio of 16.70. Industrial median is 10.18
Sustainability - 1/5 for having interest coverage ratio of 6.39 and debt ratio of 0.53. Industrial media for debt ratio is 0.37

Over the past decade, IOI performance in terms of its ROA had been above than the sector upper quartile ROA. This is one of the better Bursa Plantation companies.

IOI achieved a 10-years peak in ROA in 2022. There seemed to be a corresponding market price uptrend. The ROA has since declined and so has market prices.

But when you look at the past 10 years ROA vs market price pattern, you can see that the current market price is lower than those from 2017 to 2021. In contrast the current ROA is better than those achieved from 2017 to 2021.

Is the market suggesting that the ROA in the coming year will decline? But if the fundamentals don’t suggest this, would this be an investment opportunity?