KLK
KUALA LUMPUR: CIMB Equities Research cut its earnings forecasts for Kuala Lumpur Kepong’s (KLK) FY19-20F by 28%-36% to reflect lower crude palm oil (CPO) and palm kernel (PK) price assumptions.
It said on Thursday the lower CPO and PK outlook led it to downgrade its sum-of-parts based target price to RM24.54 from RM24.82.
“We retain our Hold call as we expect KLK's share price to be supported by its assets. Key upside/downside risks for KLK are higher/lower CPO prices and FFB yields,” it said.
KLK posted a 24% on-year decline in its FY9/18 core net profit due mainly to weaker plantation contribution. Final net profit was 2% below its forecast and 15% below consensus due to weaker-than-expected plantation earnings (due to a combination of lower palm product and rubber prices).
“We excluded forex losses of RM41mil, RM34mil in provisions for inventories write-offs, RM22mil impairments of PPE and RM29mil surplus on government acquisition of its land as well as disposal of land and investments to arrive at its FY18 core net profit,” it said.
Plantation earnings before interest and tax (EBIT) fell 58% on-year /46% on-year in 4QFY18/FY18, due mainly to lower average selling prices (ASPs) for CPO (-19% on-year /-15% on-year) and PK (-26% on-year /-22% on-year), which more than offset the higher FFB output (+1% on-year).
On top of this, the performance was affected by negative contributions from processing and trading operations and net unrealised forex loss of RM85mil on loans advanced and bank borrowings for its Indonesian subsidiaries.
The manufacturing segment posted a 42% on-year decline in 4QFY18 pretax profit due to lower profit margins and sales volume from its Europe operations.
On top of this, it accounted for an impairment of RM21.6mil on an underperforming specialised oleochemical plant during the quarter.
“For the full year, manufacturing profit more than doubled due to strong sales volume, favourable raw material prices and healthy margins,” it said.
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