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Kuala Lumpur Kepong Bhd
(Feb 17, RM22.44)

Maintain neutral with an unchanged target price of RM23.37. We have kept our financial year ending September (FY15) and FY16 net earnings forecasts unchanged and we are maintaining our target price at RM23.37 based on an unchanged price-earnings ratio of 21 times FY15 earnings per share estimates.

 

KLK’s first quarter ended December 2014 (1QFY15) net profit of RM214.2 million was slightly below our and consensus’ expectations, making up 18% and 19% of forecasts respectively.

Its 1Q net profit was 27% lower year-on-year (y-o-y), largely attributed to weaker crude palm oil (CPO) prices averaging RM2,138 per tonne (-6.7% y-o-y) and rubber at RM6.60 per kg (-24.2% y-o-y) coupled with reduced crops for both CPO and rubber.

Furthermore, its manufacturing division has dipped 63% y-o-y as the weak price of oil had affected the fatty alcohol and surfactant businesses.

Nonetheless, higher profit recognition was seen from Bandar Seri Coalfields as the division increased by 5% y-o-y.

Quarter-on-quarter net profit improved by 25%, thanks to contributions from both the plantation and manufacturing divisions, with positive contributions from the refineries and kernel crushing plants. — BIMB Securities Research, Feb 17

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This article first appeared in The Edge Financial Daily, on February 18, 2015.

 

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