PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 21 Oct 2020, 10:11 AM


Kuala Lumpur Kepong- Steady Results

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Kuala Lumpur Kepong (KLK) posted a core net profit of RM573.3m (YoY: +15.2%) for 9MFY20 after stripping out i) foreign exchange gain of RM48m, ii) loss on derivatives amounting to RM33.6m and iii) surplus on land disposal (RM2m). The results were in line with our and the consensus full-year expectations, making up 70% and 72.3%, respectively. We expect to see a stronger earnings growth in the final quarter given the pick-up in FFB production and the current CPO price momentum. No dividend was declared for the quarter. Maintain Neutral call with an unchanged SOP-based TP of RM24.34.

  • 3QFY20 revenue (QoQ: -2.4%, YoY: +0.2%). Compared to 3QFY19, the solid topline was attributed to stronger upstream plantation sales, which were partly offset by weaker manufacturing and property sales. Plantation sales improved by 13.4% YoY to RM1.5bn on the back of an increase in FFB production and CPO prices. Average recorded CPO price rose from RM1,973/mt to RM2,239/mt while average palm kernel price increased from RM1,973/mt to RM2,239/mt. Manufacturing sales slipped 5.9% YoY to RM2.1bn, owing to weaker oleochemical sales volume in Malaysia and China markets. Property sales tumbled 67.5% YoY to RM15.1m as sales were affected during the Movement Control Order Period.
  • 3QFY20 core net profit (QoQ: -11.7%, YoY: +10.6%). Excluding the i) foreign exchange gain (RM172.2m), ii) loss on derivatives (RM34.5m) and other non-core items, the Group’s core earnings rose 10.6% YoY to RM183.5m, lifted by stronger plantation earnings. Plantation pre-tax earnings jumped 3-fold to RM176m, led by an increase in plantation earnings margin. On the other hand, manufacturing pre-tax earnings would have seen a decline of 24% YoY to RM86.6m after stripping out the changes in fair value of outstanding derivative contracts. The weaker manufacturing earnings were mainly dragged by lower oleochemical contribution from Malaysian and China markets. Property pre-tax earnings contracted 36.8% YoY to RM7m due to lower property sales from the Bandar Seri Coalfield project.
  • Positive outlook. Despite uncertainties arising from the Covid-19 pandemic, the Group expects to see stronger results for FY20, underpinned by the current CPO price momentum while oleochemical business is also on the course for recovery.

Source: PublicInvest Research - 21 Aug 2020

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Labels: KLK

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Chart Stock Name Last Change Volume 
KLK 21.58 -0.12 (0.55%) 162,000 

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