PETALING JAYA: Plantations, manufacturing and property group Kuala Lumpur Kepong Bhd
’s (KLK) prospects will likely continue to be weighed down by softer benchmark crude palm oil (CPO) price assumptions, poorer-than-expected palm oil output and weaker prices for soybean and rapeseed.
As such, Apex Research has downgraded its call on KLK to “hold” from “buy” with a lower target price of RM19.90 a share from RM21.60.
This was despite the announcement last week that Chinese electric vehicle (EV) manufacturer BYD Co Ltd will be the anchor tenant at KLK TechPark in Tanjong Malim, Perak.
The research house views BYD’s commitment as a “positive development and a significant milestone for KLK”.
“This anchor tenancy reinforces the strategic value of the entire KLK Tech Park master plan, potentially unlocking substantial follow-on development opportunities.
“The credibility bestowed by a global leader like BYD significantly enhances the prospects for the remaining land, which we believe will evolve into a core, non-cyclical earnings pillar for KLK over the next decade,” the research firm said in a report yesterday.
BYD is setting up its first completely knocked down assembly plant in Malaysia at KLK TechPark, occupying 150 acres for the first phase within the larger 1,500-acre master-planned industrial hub.
The plant is set to serve as a key catalyst, attracting ancillary suppliers and service providers to the park and fostering a comprehensive, advanced EV manufacturing ecosystem.
Apex Research said, in the absence of official disclosure, it benchmarked against prevailing industrial land lease rates, which are in the range of 30 sen to 50 sen per square foot (psf) per month.
“Applying this to the 150 acres implies an estimated lease income of RM23.5mil to RM39.2mil annually or about 0.1% to 0.2% of last year’s revenue.
“Assuming a conservative profit after tax margin of 50%, this translates to RM11.8mil to RM19.6mil, or 1% to 2% of FY25 to FY27 forecast core earnings,” the research house said.
Apex Research added it expects near-term earnings contribution from KLK’s industrial park to “remain modest”, with more meaningful upside only emerging once development phases scale up and ancillary tenants are secured.
Meanwhile, Maybank Investment Bank Research (Maybank IB) maintained its “hold” call on KLK with an unchanged target price of RM19.70 per share.
The KLK Tech Park development was viewed positively by the research house. It said, based on its back-of-the envelope calculation, the deal with BYD may easily net over RM65mil in profits assuming a conservative net profit margin of just RM10psf over the next two to three years.
“Besides its well-established Bandar Seri Coalfield township in the Klang Valley, KLK will now have its second major development project to help provide a new engine of earnings growth over the next 10 years.
“While no details were announced on the initial land deal, we suspect with BYD as the anchor, KLK will enjoy a relatively competitive pricing given the land taken up. With time, we believe KLK can command much higher pricing on its industrial plots for smaller parcels,” Maybank IB said.
The research house noted that based on research, the asking prices of industrial land in Tanjong Malim now ranges between RM22psf to RM55psf depending on land area and infrastructure.
