The research house said on Friday that while the group’s Q3 results had disappointed largely on weak plantation earnings, it believed there was a net inventory build-up which could boost profits in the final quarter.
However, it conservatively lowered its earnings forecasts by 5%-6% and trimmed its target price to RM23.70 from RM25.00.
“Given limited downside, KLK remains a HOLD,” the research house said.
Plantation earnings before interest and tax (EBIT) for the quarter fell 42% year-on-year to RM136mil, underpinned by lower plantation revenue and higher-than-expected cost of production.
The lower revenue was achieved despite relatively flattish FFB output and only 14% lower CPO average selling prices achieved.
“This leads us to believe there was a net build-up in inventory in Q3 that could boost sales in the Q4,” it said.
As for manufacturing, it noted that the division chalked up decent margins of 4% to bring in RM99mil in EBIT, a turnaround from a RM5mil loss a year ago.
Its oleo division benefited from the low raw material cost.
As for property, it delivered a decent EBIT of RM8mil on higher progress billing.
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