“Based on our lower CPO average selling price (ASP) forecast for 2015-2017 estimate, our core net profit forecasts are cut by 7%-10%, resulting in a lower price target of RM21.21,” it said.
Affin Hwang Research maintained its “Hold” call on KL Kepong despite the broad market and share price corrections.
KL Kepong was up 6 sen to RM20.28 in early trade.
The research house said KL Kepong’s nine months to June 30 core net profit accounted for 69.2% of its FY15 forecast of RM982.9mil and 73.3% of the consensus average of RM927.5mil.
With the blended CPO ASP averaging RM2,155 per tonne in nine months ended June 30 and trending lower in fourth quarter ending Sept 30, KL Kepong’s nine months core net profit was below expectations.
“Based on our CPO ASP forecast of RM2,070 per tonne for fourth quarter to Sept 30 and RM2,400 per tonne for 2016-17 estimates, we cut our core net profit forecasts for KL Kepong by 9.6% in FY15, 6.9% in FY16 and 7.2% in FY17. Net dividend per share forecasts for FY15-17 are maintained,” it said.
Affin Hwang Capital Research said its 12-month target price was cut from RM22.79 to RM21.21 while the “Hold” rating was hence maintained even though KL Kepong’s share price has fallen by 12% in the past one month with the recent broad market correction and CPO price weakness.
“Key risks include economic conditions impacting crude and vegetable oil prices, high production of vegetable oil and/or changes in rules and regulations and forex losses/gains due to currency weakness in key operating countries,” it added.
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