KUALA LUMPUR (Feb 15): CIMB Investment Bank Bhd raised its sum-of-parts (SOP)-based target price for Kuala Lumpur Kepong Bhd (KLK) by 6% to RM27.15 to reflect higher market valuations for its stake in overseas investment, Synthomer Plc, and update its latest balance sheet position.

However, it maintained the group's earnings forecast and "hold" call as the stock offers limited upside to the target price.

"The implied financial year ending Sept 30, 2017 (FY17) price earnings (P/E) for KLK at our SOP valuation is 25.1 times, which is in line with the group's historical five-year average forward P/E," said CIMB analyst Ivy Ng Lee Fang in a note Feb 14.

Yesterday, KLK announced that its first quarter's net profit more than halved to RM360.7 million from RM795.2 million a year ago because of the absence of a one-off gain of RM485.7 million on disposal of a plantation land for the quarter ended Dec 31, 2016 (1QFY17). Revenue, however, grew 26.7% to RM5.5 billion in 1QFY17 from RM4.34 billion in 1QFY16.

Ng said KLK's core profit fell 1% year-on-year in the 1QFY9/17 as weaker manufacturing contributions and higher net interest expenses trumped higher plantation earnings.

"This was broadly in line with expectations at 29% of our and Bloomberg consensus full-year forecasts. 1QFY17 core net profit improved 7% quarter-on-quarter due to higher plantation earnings but this was partly offset by the absence of RM268 million deferred tax recognition in 4QFY16," she added.

At 11.24am, KLK dipped 14 sen or 0.56% to RM24.96 with 556,700 shares transacted, valuing it at RM26.6 billion.