Downside Surprises From IOI Corporation ?

Exceptional losses could wipe off 20-25 per cent from IOI Corp's 2009 fiscal profit, says an analyst at RHB Research.

PLANTER IOI Corp Bhd's second quarter financial results, out this Friday, may hold some downside surprises in the form of more foreign exchange (forex) losses and a property writedown, analysts said. RHB Research said there might be a transactional forex loss of RM100 million and a writedown of the value of its Sentosa Cove project in Singapore.

The latter could result in a group loss of between RM185 million and RM247 million. "Exceptional losses could wipe off 20-25 per cent from IOI's 2009 fiscal profit," analyst Hoe Lee Leng said in a report yesterday.

She expects IOI to record a lower net profit of about RM1.5 billion for the full year ending June 30 3009, but this forecast does not include the potential exceptional items for the second quarter.

IOI recorded a realised forex loss of RM100.6 million in its first quarter.RHB Research also believes that revenue from the IOI group's plantation division could be lower than expected in the second quarter due to defaulted transactions. Contributions from the group's manufacturing and property divisions might also be weaker than thought. Other research houses are also expecting the group to record lower profit this fiscal year compared with last year's RM2.2 billion.

TA Securities analyst James Ratnam said that he expected the group to record further forex losses this year from borrowings and hedging contracts.He sees the group making a net profit of RM1.5 billion for the full year, while CIMB Research has forecast RM1.4 billion. Both forecasts do not take into account potential forex losses.

Most analysts tracking the group have a negative recommendation on its shares, according to Bloomberg data. Hoe maintained an "underperform" call on the stock with a target price of RM3.80. IOI shares shed 2 sen to RM3.84 yesterday. "Should IOI report the exceptional losses in its (second quarter) results, some investors might be caught by surprise and might sell down its shares, which could provide an opportunity to accumulate IOI on weakness," she said.

Article from Business Times.com