- Kulim Bhd’s 3QFY15 results were above expectations due to other operating income of RM49.9mil and higher-thanestimated interest income.

- Other operating income amounted to RM49.9mil in 9MFY15 vs a negative RM0.2mil in 9MFY14. Included in the operating income was an unrealised forex gain of RM48.8mil in 3QFY15. We think that the unrealised forex gain could have come from disposal proceeds of New Britain Palm Oil Ltd, which were held in foreign currencies.

- Kulim’s EBIT (ex-operating income) rose by 6.0% from RM101.8mil in 9MFY14 to RM107.8mil in 9MFY15 as interest income climbed from RM7.7mil to RM30.0mil. Kulim’s cash balance expanded from RM342.6mil as at end-December 2014 to RM1.8bil as at end-September 2015, due to the disposal of New Britain Palm Oil Ltd.

- Operationally, Kulim’s plantation EBIT plunged by 61.5% YoY to RM55.1mil in 9MFY15 due to lower CPO prices. Average CPO price realised was RM2,208/tonne in 9MFY15 against RM2,466/tonne in 9MFY14.

- On a quarterly basis, average CPO price realised edged down by 8.0% from RM2,272/tonne to RM2,090/tonne. Kulim’s FFB production improved by 5.4% YoY in 9MFY15.

- After recording an EBIT of RM28.9mil in 2QFY15, the oil and gas support unit’s EBIT was a mere RM0.3mil in 3QFY15.

- We think that the fall in earnings was due to the completion of the delivery of a floating storage offloading vessel to an oil field in July 2015. Going forward, Kulim foresees encouraging results for the oil and gas support unit due to a new US$191.8mil contract, which will last for 20 months.

- The contract involves the engineering, procurement, construction and commissioning of a floating storage offloading facility for the North Malay Basin in Peninsular Malaysia.

- The agro-foods division (mainly cattle business) recorded a bigger loss of RM8.2mil in 9MFY15 vs RM4.6mil in 9MFY14. However, comparing 3QFY15 against 2QFY15, the division swung from a loss of RM0.3mil to a profit of RM1.3mil.

- Kulim’s capital repayment exercise of RM4.10/share is expected to be completed in 3QFY16.

Source: AmeSecurities Research - 26 Nov 2015