Kuala Lumpur Kepong Berhad - Heavy losses from Synthomer
Wed, 27-Nov-2024 07:43 am
by Steven Chong • Apex Research

Counter

KLK (2445)

Target Price (RM)

21.6

Recommendation

Buy

Summary

  • KLK reported 4QFY24 core net profit of RM255.3m (+129.4% qoq, +33.0% yoy) and FY24 CNP of RM866.0m (-8.7% yoy), which was within our expectations at 99% but below consensus forecast at 85%.

  • We maintain our earnings forecast for FY25-27F as the recent surge of CPO price has already factored into our CPO price assumption.

  • Re-iterate our HOLD recommendation with a target price of RM21.60 based on 18.1x PER pegged to FY25 EPS of RM1.19. 

     

Results Review

  • Results review. KLK’s 4QFY24 CNP registered at RM255.3m, grew +33.0% yoy and +129.4% qoq. Meanwhile, revenue recorded at RM5.7bn, marginally eased -1.7% yoy but grew +3.2% qoq. CNP was derived after stripping out one-off adjustments of RM62.0m (Foreign exchange loss: RM14.4m, gain on derivatives: -RM120.5m, surplus on disposal of land: -RM9.8m, impairment related to Synthomer: RM366.5m and others: RM2.1m).  The strong yoy performance was lifted by higher CPO and PK ASP. 

     

  • Within expectations. The Group’s FY24 CNP of RM866.0m came within our expectations, matching 99% of our full year forecast but below consensus estimates at 86%. 

     

  • Operations Highlights. Plantation segment’s revenue picked up to RM925.2m in 4QFY24 (+1.8% yoy) with operating profit of RM526.9m (+26.2% yoy). The strong performance was led by higher selling prices in both CPO (+8.1% yoy) and Palm kernel (+44.8% yoy). Elsewhere, the manufacturing segment revenue declined to RM4.7b (-1.4% yoy) during the quarter. Operating losses has narrowed down to RM9.9m which is a significant improvement from a loss of RM102.0m, thanks to its Malaysia and European oleochemical operations.

     

  • Outlook. Looking ahead, we are expecting CPO to remain elevated until 1Q25 on the back of seasonally higher demand for palm oil towards year-end.  We maintain our FY25F CPO price assumption at RM4,300 at the moment in view of the uncertainty in the global economy and the potential threat of tariffs from Trump.

     

  • Valuation. We maintained our HOLD recommendation with an unchanged target price of RM21.60 based on 3-year forward PE of 18.1x pegged to FY25F EPS of RM1.19.

     

  • Risk. EU export ban and regulations, changing weather patterns affect FFB production, taxation and export ban in Indonesia threatens local CPO demand, shortage of labour and rising operational cost.

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