IOICORP (1961): Undervalued Plantation Giant Navigating CPO Volatility
Summary (TL;DR):
- Research Firm: RHB Investment Bank
- Subject: IOICORP / IOICORP (1961)
- Core Rating: BUY
- Target Price / Top Picks: MYR 4.30
- One-Liner: RHB maintains a BUY rating on IOICORP, viewing it as an undervalued big-cap plantation company despite CPO price volatility, with a more balanced fundamental outlook expected for FY26F.
Report at a Glance
RHB Investment Bank released its latest research report on IOICORP on 2025-07-09, maintaining a “BUY“ rating with a target price of MYR 4.30. The core thesis of the report is that IOICORP remains an undervalued big-cap player in the plantation sector, trading at the lower end of its peer valuation range, with expectations of a more fundamentally balanced year in 2026 despite ongoing CPO price volatility driven by geopolitical risks.
Investment Thesis (The Bull Case)
- Point 1: IOICORP is considered undervalued, currently trading at 17x FY26F earnings, which is at the low end compared to its peers’ range of 17-22x.
- Point 2: The analyst expects 2026 to bring a more balanced fundamental outlook for the palm oil market, with improving global supply and a pickup in demand due to more attractive relative prices.
- Point 3 / Key Beneficiaries: IOICORP is the direct beneficiary of these positive factors, and its 32.1% stake in associate Bumitama Agri also contributes to its valuation.
Potential Risks (The Bear Case)
- Risk 1: Significant fluctuations in Crude Palm Oil (CPO) prices, heavily influenced by geopolitical events and crude oil price movements.
- Risk 2: Adverse weather conditions, which can negatively impact fresh fruit bunch (FFB) production and overall agricultural output.
- Risk 3: Unfavorable shifts in the global vegetable oil industry’s demand and supply dynamics, affecting pricing and market share.
Financial Forecast Summary
The analyst’s financial projections for the coming years are as follows:
| Fiscal Year (YE to Jun) | FY25F | FY26F | FY27F |
|---|---|---|---|
| Revenue (RM mil) | 13,112 | 13,071 | 12,994 |
| Net Profit (RM mil) | 1,262 | 1,335 | 1,368 |
| EPS (sen) | 0.20 | 0.22 | 0.22 |
| DPS (sen) | 0.10 | 0.11 | 0.11 |
| Dividend Yield (%) | 2.7 | 2.8 | 2.8 |
| P/E Ratio (x) | 18.41 | 17.39 | 16.97 |
(Source: RHB Investment Bank research report)
Valuation & Target Price
| Rating | BUY |
| Last Close Price | MYR 3.74 |
| Target Price (TP) | MYR 4.30 |
| Valuation Methodology | The valuation uses a Sum-of-Parts (SOP) approach, applying a target P/E of 18x FY26F for both the plantation and downstream divisions, alongside RHB’s fair value for its associate Bumitama Agri. This is also supported by an EV/ha of USD35,000/ha. |
Analyst’s Conclusion
- Overall Stance: RHB maintains its “BUY” rating on IOICORP, reiterating its belief that the company is undervalued relative to its peers and offers significant upside potential.
- Key Catalyst/Strength: IOICORP’s current undervaluation, coupled with an anticipated fundamental rebalancing of the global oils and fats market in 2026, provides a strong investment case. The company’s improved ESG score also adds to its appeal.
- Major Headwind/Risk: The primary challenge remains the persistent volatility in CPO prices, largely influenced by unpredictable geopolitical developments and their knock-on effects on crude oil.
- What to Watch: Investors should closely monitor the evolving geopolitical landscape and its impact on CPO prices, as well as the global supply and demand dynamics of the 17 oils and fats complex, especially the demand from price-sensitive countries and the effect of US biofuel blending on Soybean Oil (SBO) prices.
Disclaimer: This article is a summary and interpretation of a research report published by RHB Investment Bank on 2025-07-09. All information is for reference purposes only and does not constitute investment advice. Investors should conduct their own independent research and due diligence and assume all associated risks.
