Kim Loong Resources Berhad - An insipid start
Mon, 30-Jun-2025 07:10 am
by Steven Chong • Apex Research

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KMLOONG (5027)

Target Price (RM)

2.10

Recommendation

Hold

  • KMLOONG reported CNP of RM39.9m (-12.4% yoy, +76.2% qoq) in 1QFY26, which came broadly in line with our expectations, representing 25.4% and 24.7% of our and consensus forecasts, respectively.

  • Modest FFB output hitting 79.7k tonnes, meeting our expectation at 25.1%. We expect output to improve in the coming quarters,recovering from adverse weather conditions.

  • Re-iterate our HOLD recommendation with unchanged target price of RM2.10, based on 13.1x P/E multiple pegged to FY26F EPS.

 

Results within expectations. 1QFY26 CNP of RM39.9m (excluding FV gain on biological assets of RM16.7m and gain on derivatives of RM1.3m) came within expectations, accounting for 25.3%/24.7% of ours/ consensus CNP forecast. 

 

YoY. 1QFY26 CNP fell -12.4% yoy, mainly due to weak performance in the milling division. We gather that plantation segment’s EBIT rose +35.4% yoy to RM47.3m, supported by strong CPO and FFB prices. On the flip side, milling segment’s EBIT declined -43.8% yoy to RM21.8m, as lower OER weighed on margins.

 

QoQ. CNP surged +76.2% qoq thanks to a solid rebound in FFB output following the low crop season. This helped reduce reliance on third-party supply and led to better milling margins. However, revenue slipped -7.1% qoq to RM411.7m, in line with the weaker CPO prices during the quarter.

 

Outlook. FFB output came in at 79.7k tonnes, making up just 25.1%/23.9% of ours and management estimate. We derived management’s figure based on the midpoint of their guided FFB growth range of 5–10%. That said, we expect output to gain traction in the coming quarters as operations gradually recover from earlier weather-related disruptions. Meanwhile, CPO prices are likely to remain under pressure and may trend between between RM3,800 and RM4,000, as stockpiles are projected to build in 2QFY26 following a recovery in palm oil production.

 

Earnings Revision. Given that the reported earnings are deemed within expectations, we kept our forecast unchanged.

 

Valuation. Re-iterate our HOLD recommendation with unchanged target price of RM2.10 by pegging 13.1x P/E multiple to FY26F EPS and 0% ESG factored premium/discount based on three-star ESG rating. 

 

Risk. EU export ban and regulations, changing weather patterns, taxation and export duty in Indonesia affects global supply, shortage of labours and rising operational cost.

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