Kenanga upgrades United Malacca to ‘outperform’, raises TP

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KUALA LUMPUR (June 30): Kenanga Investment Bank Bhd upgraded United Malacca Bhd to “outperform” from “market perform” and has raised its target price (TP) to RM7.65 from RM7.50, as its better-than-expected dividend is seen as a short-term catalyst.

In the mid-term, the research house said that investors should position for the expected 27% earnings growth in FY15.

On Friday, the group reported 4QFY14 net profit of RM17.7 million, up 81% from RM9.8 million, while revenue rose 43% year-on-year (y-o-y) to RM63.5 million.

For the year, net profit rose 4% y-o-y to RM71.5 million, while cumulative revenue increased 19% y-o-y to RM244.3 million.

The group announced a total dividend of 16 sen for the year, comprising a second interim dividend of 11 sen and a special dividend of 5 sen.

Kenanga noted that core net profit (CNP) declined 2% y-o-y for FY14 to RM65.3 million due to a 5% fall in crude palm oil (CPO) prices to RM2,482/metric tonne (MT).

“However, sign of improvement is seen if we focus on 4Q14 CNP, which has increased 126% y-o-y to RM17.2m against RM7.6m in 4Q13.

“Note that CPO prices have improved 15% y-o-y to RM2,693/MT while FFB volume improved 8% to 69,886 MT,” said the research house in a note today.

Going forward, the group expects an additional 758ha of landbank to reach maturity, boosting its total matured landbank by 5%, while Kenanga expects 8% fresh fruit bunches (FFB) growth in FY15.

“Coupled with better CPO prices y-o-y, we expect FY15 earnings to grow 27% to RM90.9m,” said Kenanga.