Thursday, April 7, 2011

IOI Corp recoups part of losses, RHB keeps underperform, FV RM5.90

KUALA LUMPUR: Shares of IOI Corp Bhd rose on Thursday, April 7, recouping nearly half of its losses from the previous day on concerns about the impact of the suspension of its current and ongoing certification process.

At 3.50pm, IOI Corp was up seven sen to RM5.62 with 24.04 million shares done. It fell 17 sen to RM5.55 the previous day.

The Roundatable on Sustainable Palm Oil (RSPO) had suspended the current and ongoing certification process of all IOI Corp's estates with immediate effect in response to grievances brought about by NGOs.

The grievances were regarding: 1) land dispute over native customary land leased by IOI for palm oil production in Sarawak; 2) drained peat land on endangered wildlife habitat and clearing of forest area; and 3) illegal deforestation and non compliance to RSPO Principles & Criteria.

IOI Corp was given 28 days until May 2 to revert with an acceptable solution.

RHB Research said it believed this suspension has more to do with the NCR land dispute in Baram, Sarawak, than any other issue.

Although the Miri High Court ruled last year that the land was rightfully NCR land, the court also said that the land rights can be extinguished by paying compensation to the natives.

IOI Corp has since been waiting for the natives to provide information to the court on the details of their claims, but the natives have yet to do so.

If the NGO grievances are mainly concerning this land dispute, we believe the impact to IOIC would not be as significant as in Golden Agri's case, and should not result in the big consumer MNC's boycotting IOIC's products.

'We believe this land dispute is resolvable, as it is just a matter of how much compensation is to be paid to the natives for the land.

'While we do not expect any significant impact to IOI Corp's earnings, there could be a knee-jerk reaction to this news, particularly from foreign investors, who are more sensitive to such news.

'IOI Corp's foreign shareholding was about 18% as at end-Dec 2010. Maintain Underperform with fair value of RM5.90,' it said.

No comments:

Post a Comment