2. 4QFY16 earnings to be even stronger. As KMLOONG is a pretty much a palm oil producer, we can use CPO price as a barometer to predict its earnings. Their 3QFY16 reflects period from Aug-2015 to Oct-2015 in which average CPO price is RM2062/MT. Looking ahead, Nov-2015 and Dec-2015 CPO price average is RM2139/MT or 4% better than last quarter. 4% can easily translate to 10% earnings increase as most plantation companies’ earnings are very sensitive to CPO price movement. As a conclusion, I am expecting 4QFY16 earnings to be better than 3QFY16.
3. Strong balance sheet with net cash of RM212.6m or RM0.23 per share. As of end-Oct 2015 (or 3QFY16), KMLOONG has RM257.6m of total cash and RM45.0m of total debts. This means net cash of RM212.6m or RM0.68 per share. Such a strong balance sheet will allow the Company to continue its expansion plan (e.g. buy more plantation land or build new mills) while continue its dividend payment at the same time.
4. Expect FY17 EPS of 31.24 sen. I am annualizing the 3QFY16 EPS of 7.81 sen. Note that this method is very conservative as CPO price has improved from 3QFY16 average CPO price of RM2062/MT. This means around 28% growth in earnings against FY15 EPS of 24.34 sen.
5. Theoretically worth RM4.37 or 41% upside. The Target Price of RM4.37 is based on 14x PE on FY17 EPS of 31.24 sen. My Fwd. PE of 14x is at 30% discount to average Mid-Cap plantation companies PE of 20x. The discount is to reflect KMLOONG’s smaller market cap. The most comparable companies are United Malacca (~22x Forward PE; Market Cap RM1.27b ) and TSH (~18x Forward PE; Market Cap RM2.64b). Kim Loong Market Cap is RM0.97b.
KMLOONG (5027) - KIM LOONG - The golden dragon that gives you angpow for CNY 2016
KMLOONG, KMLOONG (5027), 5027, EN5027, KLSE:KMLOONG,
