KUALA LUMPUR (Nov 24): Kuala Lumpur Kepong Bhd (KLK) emerged among the top gainers on Wednesday (Nov 24) morning after its net profit for the fourth quarter ended Sept 30, 2021 (4QFY21) beat analyst expectations.
The counter rose as much as 48 sen or 2.37% to a high of RM20.74.
At 10.13am, the counter had pared some gains at RM20.66, still up 49 sen or 1.97%.
Year to date, the counter had fallen 12.97%.
KLK told a bourse filing on Tuesday its 4QFY21 net profit tripled to RM625.8 million from RM208.82 million a year ago due to higher crude palm oil (CPO) prices and profit contributions from newly acquired IJM Plantations Bhd (IJMP). Its quarterly revenue also rose 48.24% to RM5.93 billion from RM4 billion for the same quarter last year.
For FY21, KLK’s net profit also nearly tripled to RM2.26 billion from RM772.6 million for the previous year as revenue increased 27.7% to RM19.92 billion from RM15.6 billion.
Affin Hwang Investment Bank Research analyst Nadia Aquidah said in a note on Wednesday KLK’s FY21 core net profit rose more than 100% year-on-year to RM1.7 billion, coming in above her expectations due mainly to higher-than-expected contributions from its associates and lower tax.
Given the strong results, she raised her FY22 and FY23 core earnings per share estimates by 2.1% and 3.3% to 137.1 sen and 123.1 sen respectively for KLK, mainly to take into account higher contributions from its investment holdings.
“After our earnings forecast revisions, our discounted cash flow-derived target price (TP) is now higher at RM22.90 from RM22.62 previously. Given the recent pullback in share prices and the potential 13% [upside] to our new TP, we upgrade KLK to a 'buy' rating from 'hold' previously,” she said.
Meanwhile, Hong Leong Investment Bank Research analyst Chye Wen Fei said KLK's FY21 core net profit of RM1.86 million beat his expectations, accounting for 120.6% and 126.3% of his and the consensus estimates respectively due mainly to a better-than-expected contribution from 20%-owned associate Synthomer plc.
He raised his FY22 and FY23 core net profit forecasts by 46.4% and 30.7% to RM1.6 billion and RM1.45 billion respectively for KLK, mainly to reflect higher CPO prices, but partially offset by lower fertiliser cost assumptions.
“We note that our FY22 and FY23 CPO price assumptions are now RM3,688 per metric ton (MT) and RM3,050 per MT (versus RM3,125 per MT and RM2,900 per MT in FY22 and FY23 previously), and our new forecasts have yet to reflect contributions from newly acquired IJMP,” he said.
Following the upward revision of core net profit forecasts for KLK and rolling forward of the valuation base year (from FY22 to FY23), he maintained his "buy" rating of KLK with a higher sum-of-parts TP of RM25.62 (from RM25.33 previously).
Kenanga Research analyst Adrian Kok also said KLK's FY21 core net profit of RM1.68 billion came above his (122%) and the consensus (114%) estimates due to higher CPO prices and IJMP contributions.
“Firm CPO prices and potential improvements in downstream should boost [its] 1QFY22 earnings,” he said.
He raised his FY22 earnings estimate by 14% to RM1.43 billion for KLK to capture IJMP's estimated contributions, and introduced estimated earnings of RM1.32 billion for FY23.
He maintained his "outperform" call on KLK with a higher TP of RM26.50 and an FY22 estimated price-earnings ratio of 20 times.
“KLK is still our preferred integrated pick with fresh fruit bunch and earnings boosts from mergers and acquisitions, its below -2.0SD (standard deviation) valuation and stable foreign shareholding levels,” he said.