FW: AmBank Research - Plantation Sector: Impact of MFRS 141 NEUTRAL, 8 Jan 2018

 

 

SECTOR FOCUS OF THE DAY

Plantation Sector: Impact of MFRS 141                                   NEUTRAL

 

Plantation companies with financial years ending 31 Dec 2018 will be implementing the MFRS 141 accounting standard this year while those with financial years ending March, June or September are allowed to implement the accounting standard in FY19F. In our stock universe, the companies that will be affected are IJM Plantations (IJMP) for financials ending FYE3/19F, TSH Resources (TSH) for financials ending FYE12/18F and Kuala Lumpur Kepong (KLK) for financials ending FYE9/19F.

 

We believe that IJMP and TSH's depreciation expense would increase by more than 50% each in their respective financial years under the new accounting standard. This is expected to result in unexciting earnings performances. We have accounted for the higher depreciation expense for IJMP and TSH.

 

In spite of the higher depreciation expense, IJMP's net profit is expected to improve by 81% in FYE3/19F after the huge upkeep and maintenance expenses in FY18F. We cut IJMP's FYE3/18F net profit by 42.4% in November 2017 as its quarterly results were weak. As for TSH, we have lowered the group's FYE12/18F net profit by 11% due to the higher depreciation expense.

 

Others :

TSH Resources: Higher depreciation to hit FY18F earnings             HOLD

 

 

QUICK TAKE

Plantation Sector: News flow for week 2 – 5 January       Neutral

 

 

STOCKS ON RADAR

Luxchem, Ann Joo, Cypark Resources, E.A. Technique

 

 

ECONOMIC HIGHLIGHT

Malaysia: Economic momentum remains upbeat

 

 

NEWS HIGHLIGHTS

Retail Sector: Mydin puts Sam’s Groceria stores up for sale

Globetronics Technology: Robust demand for chips

RGB International: Expects RM50mil more in turnover

KUB: Still seeking buyer for A&W Malaysia

 

 

 

 

 

DISCLAIMER:

The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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