Kuala Lumpur Kepong - Unlocking Value Through a New Growth Corridor
Wed, 17-Sep-2025 08:23 am
by Steven Chong • Apex Research

Counter

KLK (2445)

Target Price (RM)

19.90

Recommendation

Hold

  • KLK Tanjong Malim Tech Park, 10-year industrial development with RM3.5bn GDV (1,300 acres industrial, 200 acres residential).

  • Phase 1 entails a land sale to BYD (gains in FY26), while Phase 2 may include a mixture of land sales, development profits, and recurring lease income, with contributions expected from FY27 onwards.

  • No change to our earnings forecasts as the land sale gains from Phase 1 are one-off in nature, while earnings contributions from Phase 2 lie beyond our valuation period. 

  • Keep our HOLD recommendation with unchanged target price of RM19.90, by applying a P/E multiple of 19.3x on FY26F EPS and 0% ESG factored premium/discount based on three-star ESG rating.

 

Key updates on KLK Tech Park. KLK announced further details on its Tanjong Malim Tech Park, a 1,500-acre integrated industrial hub with an estimated GDV of RM3.5bn over a span of 10 years. The development comprises of 1,300 acres for industrial use and 200 acres for residential support.

 

Project Phasing.  Phase 1 will feature BYD’s 150-acre facility with infrastructure and land clearing works currently underway. Meanwhile, Phase 2, expected to launch by end-CY25, will introduce a 200-acre vendor park to attract automotive and manufacturing ecosystem players, strengthening KLK Tech Park’s positioning as a key industrial hub in the region.

 

Our Take. We view the announcement positively, as it surpasses our earlier conservative assumption of KLK acting solely as a land lessor. As the sole developer and landowner, we believe KLK stands to capture the full benefits from the project.  With the inclusion of a high-profile anchor like BYD, it will likely to draw interests from ancillary suppliers and service providers in subsequent project phases.

 

We understand that Phase 1 was mainly structured as a land sale to BYD, with disposal gain to be recognised in FY26. In contrast, earnings impact from Phase 2 will come in 3 components, which include land sale, development profits and lease income. KLK will adopt a build-to-suit/lease model, under which it would develop customised facilities for tenants and subsequently lease them out. This approach would allow KLK to capture not just upfront land sale proceeds but also secure a stable stream of recurring rental income, enhancing earnings visibility and reducing reliance on one-off development gains. Nonetheless, we expect these profits will only accrue to the group from FY27 onwards.

 

Earnings revision. We maintain our earnings forecasts for now, as the land sale gains from Phase 1 are one-off in nature, while earnings contributions from Phase 2 lie beyond our valuation period.

 

Valuation & Recommendation. We keep our recommendation to HOLD with unchanged target price of RM19.90, by applying a P/E multiple of 19.3x to FY26F EPS and 0% ESG factored premium/discount based on three-star ESG rating. 

 

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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