KUALA LUMPUR (Dec 15): Innoprise Plantations Bhd is an attractive dividend play within the plantation sector, due to its handsome dividend yield of 10% to 15% estimated for the financial year ending Dec 31, 2022 (FY2022) to FY2024. 

RHB Research analyst Hoe Lee Leng expects the pure upstream palm oil company to deliver a dividend per share of 14 sen to 22 sen for FY2022-24. 

In a note on Thursday (Dec 15), Hoe, who has a fair value of RM1.75 for the stock, said the group’s young plantation maturity profile should translate into robust production growth going forward, helping to offset the impact of lower crude palm oil (CPO) prices.

“In 2020, Innoprise increased its dividend policy to pay out at least 80% of profit after tax, from 70% previously. This is one of the key selling points of the company, given its impressive projected dividend yields of about 10-15% for FY2022-24, even in a declining CPO price environment. 

“With a zero long-term debt commitment and no replanting required in the next few years, Innoprise should have no restrictions to maximise returns to its shareholders in the form of dividends. We believe this is an enticing proposition, as its highly attractive FY2022 dividend yield of 15% and FY2023's 11% will provide support to its share price, in light of downtrending CPO prices,” she added. 

Noting that Innoprise’s financial performance and share price are dependent on CPO price performance, Hoe said declining earnings are expected moving forward. 

“We project a three-year future earnings compound annual growth rate of -5.1%, in line with our declining CPO price per tonne assumptions of RM5,100 for FY2022, RM3,900 for FY2023 and RM3,500 for FY2024, but offset by continuing positive fresh fruit bunch growth of 2.8-7.8% during the period,” Hoe said.

Innoprise was last traded at RM1.48 a share, giving it a market capitalisation of RM708.71 million.