Kuala Lumpur Kepong Berhad - Promising Start for KLK Industrial Park
Mon, 25-Aug-2025 07:43 am
by Research Team • Apex Research

Counter

KLK (2445)

Target Price (RM)

19.90

Recommendation

Hold

  • BYD is establishing its first automotive assembly plant in Malaysia at KLK Tech Park (Tanjung Malim), spanning 150 acres of the planned 1,500-acre integrated industrial hub.

  • Assuming a conservative PAT margin of 50%, Phase 1 contribution is expected to be modest at RM11.8m–19.6m annually, translating to c.1%–2% of FY25F–FY27F core earnings. More meaningful upside should emerge as further phases are developed and additional tenants are secured.

  • No change to our earnings forecasts. Downgrade our recommendation to HOLD (from BUY) with a lower target price of RM19.90 (previously RM21.60) after rolling forward our valuation base year to FY26F. Our TP is derived after raising our P/E multiple to 19.3x (from 18.2x), in line with the updated 5-year historical trading average.

 

BYD as first anchor tenant in KLK Tech Park. BYD is setting up its first CKD assembly plant in Malaysia at KLK Tech Park, occupying 150 acres (Phase 1) within the larger 1,500-acre master-planned industrial hub. According to Perak’s state tourism, industry, investment, and corridor development committee chairman Loh Sze Yee, construction of the plant is expected to take place between June and December 2026, with vehicle manufacturing expected to commence in 2026. The plant is set to serve as a key catalyst, attracting ancillary suppliers and service providers to the park and fostering a comprehensive, advanced EV manufacturing ecosystem.

 

Our Take. We view BYD's commitment as a positive development and a significant milestone for KLK. This anchor tenancy reinforces the strategic value of the entire KLK Tech Park masterplan, potentially unlocking substantial follow-on development opportunities. The credibility bestowed by a global leader like BYD significantly enhances the prospects for the remaining land bank, which we believe will evolve into a core, non-cyclical earnings pillar for KLK over the next decade.

 

In the absence of official disclosure, we benchmark against prevailing industrial land lease rates, which are in the range of c.RM0.30-RM0.50 psf/month. Applying this to Phase 1 (150 acres) implies an estimated lease income of RM23.5m-39.2m annually (0.1%-0.2% of FY24 revenue). Assuming a conservative PAT margin of 50%, this translates into RM11.8m-19.6m, or 1%-2% of FY25F-FY27F core earnings. We therefore expect near-term earnings contribution from KLK’s industrial park to remain modest, with more meaningful upside only emerging once development phases scale up and ancillary tenants are secured. 

 

Earnings revision. We are maintaining our earnings forecasts for now, pending further updates from management. 

 

Valuation & Recommendation. We downgrade our call to HOLD (from BUY) with a lower target price of RM19.90 (from RM21.60) after rolling forward our valuation base to FY26F and applying a higher P/E multiple of 19.3x (vs. 18.2x previously), in line with the updated 5-year historical trading average. The downward revision in target price reflects softer benchmark CPO price assumptions (RM4,000/mt in 2026), while lingering geopolitical risks may continue to pressure downstream margins. 

 

Risks. 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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