KUALA LUMPUR: RHB Research Institute has raised its sum-of-parts based target price for Kuala Lumpur Kepong (KLK) to RM29.30 from RM26.80 after imputing its latest net debt position and adjusting for higher palm kernel oil (PKO) prices.
It said on Wednesday this implies an enterprise value to per hectare of US$39,000, which is within the range of its big-cap peers’ US$30,000 to RM40,000.
“We continue to like KLK as its more geographically diversified landbank reduces the risk in extreme weather situations, while its valuations remain inexpensive vis-à-vis its big-cap peers.
“Every RM100 tonne change in crude palm oil (CPO) prices could affect KLK’s net profit by 4%-6% per annum. Key risks include the reversal of CPO prices and weaker demand. Maintain BUY,” it said.
RHB Research expects KLK to see a marked improvement in its fresh fruit bunches (FFB) output from 2QFY17, given its large exposure to Indonesia which has already recovered from the El Nino phenomenon.
Despite the in-line earnings, it lifted its forecasts to reflect higher PKO prices, which have risen along with PK prices on the back of the lauric oil supply crunch.
Win a prize this Mother's Day by subscribing to our annual plan now! T&C applies.
