PETALING JAYA: Kuala Lumpur Kepong Bhd
’s (KLK) prospects for its financial year ending Sept 30, 2026 (FY26), look solid, backed by a steady growth outlook for its core upstream business and an additional boost from its property development segment.
“We remain positive on KLK given its strong upstream growth outlook, while its industrial property ventures provide an additional medium-term earnings catalyst,” said Hong Leong Investment Bank (HLIB) Research.
Following a virtual meeting with KLK’s management, the research house said the company guided for mid-high single-digit growth in fresh fruit bunch (FFB) output, and stable production costs below RM2,000 per tonne in FY26.
For the first four months of FY26, FFB output increased by 6.9%, or 2.08 million tonnes, due to factors such as a shift in cropping pattern, favourable weather conditions, and improved estate management practices, HLIB Research said.
“Management is confident that the decent year-to-date (y-t-d) FFB output growth can be sustained in the remaining months of FY26,” it added.
The research house said the company guided for a higher FY26 capital expenditure budget of around RM1.2bil, mainly for replanting activities and carry-over projects from FY25.
KLK plans to replant about 7,200 ha in FY26, with replanting largely concentrated in Sabah, Riau, and Belitung.
Nevertheless, the company expects crude palm oil production costs to remain flattish as improved productivity from higher FFB yields and oil extraction rates should offset increased manuring and labour costs.
HLIB Research further noted that KLK has already secured its FY26 fertiliser requirements since the end of 2025.
Meanwhile, the company’s property segment currently includes three industrial property projects with a combined estimated gross development value of over RM7bil, set to be launched in phases.
“Land sale gains are expected to be recognised from FY26 onwards, including gains from sales to AME Elite Consortium Bhd in FY26 and BYD Co Ltd by FY27,” the research house said.
“While earnings from residential property development will likely remain muted in the near term, we are turning more positive on the property segment’s future prospects, underpinned by KLK’s venture into industrial properties (mainly via a joint venture) since November 2024,” HLIB Research added.
However, it said losses from associate Synthomer could remain a drag on KLK’s earnings in the near term, as the European chemicals industry continues to see weak demand and margin pressure due to high energy prices and stiff competition from China.
“Given the sharp fall in Synthomer’s share price (which has declined by about two-thirds y-t-d) and weak operating outlook, KLK may face a higher likelihood of recognising further impairments on its investment.”
HLIB Research has made no changes to its forecasts for KLK, and maintained its “buy” recommendation on the stock with an unchanged target price of RM21.48.
