KLK (2445) : Disappointment over KL Kepong’s manufacturing losses
KUALA LUMPUR: CIMB Equities Research said Kuala Lumpur Kepong's final results were broadly in line with its forecasts but below consensus.
It said on Thursday the plantation company’s final core net profit accounted for 95% of its full-year forecast but only 89% of consensus full-year earnings.
“The main disappointment came from losses registered by its manufacturing division in 4QFY14, due mainly to stocks write-down following the sharp decline in crude palm oil prices.
“Final net profit is still 8% higher as the better plantation earnings more than offset weaker manufacturing and property contributions. As expected, the group declared a final dividend of 40 sen,” it said.
CIMB Research kept its EPS forecasts, sum-of-parts based target price of RM22.10 and Hold call. The stock is supported by decent dividend yields.
The research house said KL Kepong’s 4QFY14 core earnings fell 38% on-year due to losses from its manufacturing division and weaker property contributions.
“We were surprised that its manufacturing division slumped into losses of RM5.2mil due to write-down of stocks and unrealised loss of RM12.8mil from changes in the fair value of outstanding derivatives.
“This led the group’s oleochemical division to report a loss of RM13.4mil in 4Q, which trumped the profit of RM4mil achieved by its other manufacturing units,” it said.
CIMB Research pointed out KL Kepong’s property earnings before interest and tax (EBIT) fell 40% on-year due to lower progressive recognition of profits from its Bandar Seri Coalfields project.
Plantation EBIT climbed 12% on-year, thanks to higher fresh fruit bunches (FFB) output, lower costs of production and higher selling prices for its palm kernel products.
“The group believes that the current CPO price of RM2,200 to RM2,300 per tonne is supported by the exemption of export duty, a weak ringgit and restocking by large consuming countries.
“However, the impending large soybean harvest in the US and low petroleum prices are likely to cap the upside in CPO selling prices. It also expects oleochemical margins to remain under pressure due to the weak crude oil prices,” it said.- The Star
KUALA LUMPUR: CIMB Equities Research said Kuala Lumpur Kepong's final results were broadly in line with its forecasts but below consensus.
It said on Thursday the plantation company’s final core net profit accounted for 95% of its full-year forecast but only 89% of consensus full-year earnings.
“The main disappointment came from losses registered by its manufacturing division in 4QFY14, due mainly to stocks write-down following the sharp decline in crude palm oil prices.
“Final net profit is still 8% higher as the better plantation earnings more than offset weaker manufacturing and property contributions. As expected, the group declared a final dividend of 40 sen,” it said.
CIMB Research kept its EPS forecasts, sum-of-parts based target price of RM22.10 and Hold call. The stock is supported by decent dividend yields.
The research house said KL Kepong’s 4QFY14 core earnings fell 38% on-year due to losses from its manufacturing division and weaker property contributions.
“We were surprised that its manufacturing division slumped into losses of RM5.2mil due to write-down of stocks and unrealised loss of RM12.8mil from changes in the fair value of outstanding derivatives.
“This led the group’s oleochemical division to report a loss of RM13.4mil in 4Q, which trumped the profit of RM4mil achieved by its other manufacturing units,” it said.
CIMB Research pointed out KL Kepong’s property earnings before interest and tax (EBIT) fell 40% on-year due to lower progressive recognition of profits from its Bandar Seri Coalfields project.
Plantation EBIT climbed 12% on-year, thanks to higher fresh fruit bunches (FFB) output, lower costs of production and higher selling prices for its palm kernel products.
“The group believes that the current CPO price of RM2,200 to RM2,300 per tonne is supported by the exemption of export duty, a weak ringgit and restocking by large consuming countries.
“However, the impending large soybean harvest in the US and low petroleum prices are likely to cap the upside in CPO selling prices. It also expects oleochemical margins to remain under pressure due to the weak crude oil prices,” it said.- The Star
