KFima‟s full year results exceeded our FY13 revenue estimates by 9.6% to RM486.5m, but missed our earnings marginally by 7.8% due to lower profits from the plantation division. Revenue for the quarter was the highest for the year at RM122.6m (+14.3% YoY, +2.6% QoQ) attributed to higher contributions from manufacturing, food and bulking divisions. Net profit for the quarter declined to RM14.8m (-40.5% YoY, -34.8% QoQ) but full-year earnings slipped marginally by -4.6%. We are adjusting our TP to RM2.45, to reflect our rolled-over estimates for FY14F. Reaffirming our Outperform recommendation, there has been recent support of the share price which we believe is deserving based on the group‟s well-diversified business and strong balance sheet, but undervalued at 7.6x PE. Final dividends of 3.5 sen less 25% tax and single-tier 4.5 sen per share has been declared translating to a 3.2% yield for FY13.

Sustainable divisions. i.) Manufacturing of security documents and currency notes is expected to remain stable under secured contracts amidst rising costs for the segment. Ii.) Plantation operations despite its CPO price uncertainties, has delivered higher revenue but hampered by lower CPO prices. We are assured that the group will continue to focus to maximise operational efficiencies to mitigate potential adverse financial impact.

Challenging divisons – bulking and food. The bulking division has contributed positively, 16.8% YoY, however the group is anticipating variations in the Malaysia Derivatives Exchange (MDEX) edible oil tender transshipment business which arise from differential export duty structure between Malaysia and Indonesia. A challenging year ahead for the fish segment as i.) price of fish has increased due to higher costs of about 5%, and ii.) depreciation of the kina against ringgit hence reduction in kina receivables.

On an uptrend… finally. Reaffirming KFima as an undervalued stock trading at 7.6x PE multiple despite the group encompassing 5 core business segments. We have revised some our PE multiples lower pegged to the respective segments in light of industry/market sentiments and its size versus industry peers. KFima has been trading on an uptrend post elections, and have received support of the share price signifying its fundamentals to have finally garnered some interest.

Source: PublicInvest Research - 31 May 2013