PETALING JAYA: Kim Loong Resources Bhd
is likely to be an outperformer among other plantation companies, supported by its expectations of total fresh fruit bunch (FFB) production for the financial year 2024 (FY24) to be 15% higher than FY23.
This is due to the planter’s more maturing replanted estates and better profile of young palm productive areas.
However, UOB Kay Hian Research was more conservative and expects only a 12% year-on-year (y-o-y) FFB production growth due to the impact of high rainfall in the first quarter of this year.
“Among Malaysian plantation companies under our coverage, we believe Kim Loong will be the only one to see an increase in its FY24 earnings.
“We expect its FY24 earnings to improve by 7% y-o-y on the back of strong contribution from its palm oil milling operations,” the research house said.
It expects increasing milling margins with higher utilisation rate and a possible improvement in oil extraction rate with the expectation of lower rainfall in FY24 after La Nina comes to an end.
On top of that, it said the company’s biogas plant at Keningau had commenced supply of power to the grid in December 2022, which would contribute to positive revenue growth in FY24.
The research house maintained its “hold” call on the counter with a target price of RM1.80 based on a 10 times FY24 price to earnings ratio forecast.
It maintained its earnings forecasts at RM176mil and RM173mil for FY24 and FY25 respectively.
Meanwhile, TA Research said Kim Loong’s fourth quarter results came in slightly below its expectations.
“Stripping out exceptional items, the company’s core net profit increased by 20.7% y-o-y to RM37.2mil.
“The better results were mainly due to higher profit contribution from the palm oil milling operations, which helped offset weaker contribution from the plantation segment,” TA Research said.
In a filing with Bursa Malaysia, Kim Loong said it would continue to monitor the impact of volatile crude palm oil (CPO) pricing on its performance.
“The management expects the average CPO price for the financial year 2024 to stand above RM4,000 per tonne and is of the view that the group could still benefit from the current level of CPO price, especially the plantation operations.
“Having said that, the industry outlook still remains challenging if the labour shortage problem does not improve,” the company said.
