Summary

• Kim Loong Resources Bhd’s (KLR) 4QFY22 net profit surged 215.6% YoY to RM31.6m, spurred by the higher average prices of CPO and FFB at RM5118/MT and RM930/MT respectively during the quarter vs. RM3,464/MT and RM718/MT respectively recorded in 4QFY21. Revenue for the quarter jumped 95.3% YoY to RM495.6m. A final single tier dividend of 5.0 sen per share was proposed, subject to shareholders approval at the forthcoming 47th Annual General Meeting.

• For FY22, cumulative net profit gained 44.6% YoY to RM137.2m. The reported earnings were deemed within expectations, accounting to 103.5% of our full year net profit forecast of RM132.5m and 82.1% of consensus forecast of RM167.0m.

• As of 4QFY22, KLR total planted area stood at 15,939-ha (up slightly from 15,929-ha in 3QFY22). During the quarter, KLR continues to maintain a healthy tree profile (Immature: 18%, Young Mature: 7%, Prime Mature: 29%, Old Mature: 19% and Pre replanting: 27%). This implies that more than 50% of the group’s palm trees will be able to generate sustainable earnings over the foreseeable future.

• In 4QFY22, KLR’s FFB production added 19.8% YoY to 67,526 tonnes, while CPO production climbed 39.9% YoY to 78,704 tonnes. During the quarter, CPO extraction rate stood at 21.1%; continues to outperform Malaysia’s average CPO extraction rate of 19.8% over the same period highlighting the group’s production efficiency.

• We expect additional of 30,000 of FFB per annum for FY23f from the acquisition of approximately 1,100-ha of palm oil in Sabah in FY22. For FY23f, we have imputed a FFB production assumption of 300,000MT, up from 265,037MT in FY22 as labour shortage issues to see some alleviation in 2H22. This is also in line with the Malaysian Palm Oil Council (MPOC) forecast production of 18.9m tonnes in 2022 (+4.4% YoY).

• Moving forward, we expect CPO prices to remain elevated above RM4,500/MT throughout 1H22, supported by the sustainable demand and production constraints (mainly due to the persistent labour shortage in Malaysia and Indonesia’s move to hike palm oil export levy

Source: Mplus Research - 30 Mar 2022