Estate acquisitions to lift KLK’s earnings

Kenanga Research said KLK is expected to see a more than 1% increase in core net profit.

PETALING JAYA: Kenanga Research expects Kuala Lumpur Kepong Bhd’s (KLK) recent acquisition of two estates in East Kalimantan from its parent, Batu Kawan Bhd, to provide a slight lift to the company’s earnings.

The research house said KLK is still expected to see a more than 1% increase in core net profit as it plans to use part of its RM2.5bil cash holdings to pay for the entire transaction.

Kenanga Research, however, said, given the unit’s past profits, it expects its earnings to normalise in the financial year 2024 (FY24) and FY25.

KLK announced on December 14 this year the plan to acquire two estates from Batu Kawan. Since then, KLK has acquired the assets from Whitmore Holdings Sdn Bhd (WHSB) for RM277mil in cash.

KLK is a 48% subsidiary of Batu Kawan while WHSB is 100% owned by Batu Kawan.

The two estates are located in Berau, East Kalimantan, and are held by two subsidiaries: PT Satu Sembilan Delapan (SSD) which owns 5,676 ha, of which 5,384 ha has been planted, and PT Tekukur Indah (TI), which holds 1,497 ha of land, with 987 ha planted.

The research house views the acquisition as more of a strategic one over the long term. “Firstly, KLK already manages these estates for Batu Kawan but earning only RM800,000 in fees a year.

“KLK also owns 15,00 ha of oil palm plantations nearby, so the acquisitions will add scale to KLK’s overall operations of 66,600 ha in East Kalimantan.

“Lastly, the acquisition removes potential conflicts of interest as KLK will soon be completing an integrated refinery and oleochemical complex nearby, hence will eventually be buying crude palm oil and palm kernel from SSD and TI,” it added.

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