PETALING JAYA: A dispute at Kuala Lumpur Kepong Bhd
’s (KLK) Indonesian subsidiary is unlikely to materially affect the group’s earnings, despite it facing a US$39mil arbitration claim over a terminated gas supply agreement, according to CIMB Research.
It maintained its “buy” call on KLK with a target price of RM23.66 per share, saying the group’s earnings outlook remains supported by stronger crude palm oil prices and higher contributions from MP Evans Group PLC.
CIMB Research noted that, under a worst-case scenario, the compensation sought amounts to approximately 14.2 sen per share, equivalent to around 11% of its financial year 2026 net profit forecast for KLK.
The arbitration involves KLK’s unit, PT Perindustrian Sawit Synergi (PT PSS), which has been notified that proceedings with PT Pertagas Niaga (PT GN) will commence on July 10 under Indonesia’s Badan Arbitrase Nasional Indonesia.
The dispute stems from the termination of a gas supply agreement, with PT GN seeking approximately US$39mil in compensation under the contract’s take-or-pay provision after deducting a US$2.8mil bank guarantee that has already been drawn.
PT PSS intends to file a counterclaim of approximately RM55mil, alleging that PT GN breached the agreement by failing to provide a continuous gas supply.
It will also seek to invalidate the bank guarantee drawdown and recover the amount claimed.
CIMB Research said the matter remains subject to confidential arbitration proceedings, limiting the amount of publicly available information and making it difficult to independently assess the merits of either party’s claims.
“Management expects the arbitration to have no material financial or operational impact on the group. It has not incorporated any impact from the arbitration into its earnings forecasts pending greater clarity on the outcome.”
PT PSS owns KLK’s integrated refinery and oleochemical complex in East Kalimantan, Indonesia, comprising a refinery, oleochemical plant, jetty and captive power plant.
The facility produces oleochemical feedstocks that are exported to KLK Oleo’s manufacturing plants for further processing into higher value-added products such as fatty acids, glycerine, soap noodles, triacetin and fatty acid esters.
