• Overview. 4Q19 core PBT dropped 8% yoy to RM224m as revenue fell by 9% to RM3.8b on lower profit contribution from plantation and property segment. On qoq basis, core PBT increased 30% mainly due to higher profit contribution from plantation and property segment, aided by higher share of profit from associates and lower effective tax rate.

• Key highlights. 4Q19 saw plantation profit rose more than 200% to RM126m on account of higher sales volume (albeit lower palm prices) and lower cost of production. Margin improved to 7.5% from 2.9% in 3Q19.

• Against estimates: in-line. FY19 core profit was within our estimates at 107% of full year forecast. Higher sales volume and better margin in manufacturing segment for Malaysia and China operation, aided by higher profit from property segment and farming sector have partly mitigated the lower contribution from plantation segment.

• Dividend. No final DPS announced yet. The final DPS will only be recommended at later date. The total DPS paid year-to-date is 15sen (FY18: interim DPS of 15sen and Final DPS of 30sen).

• Outlook. We maintain our FY20-21 earnings forecast for now as we believe KLK has the required strong financials to diversify earnings and achieve long-term growth, if the need arises. Management guided that the performance of plantation segment for FY20 will be better in view of the improved CPO and PK prices, with oleo-chemical division expected to maintain its performance with some additional capacities coming on stream.

• Our call. Maintain HOLD with TP of RM23.80 based on target P/B of 2.22x and BV/share of RM10.73.

Source: BIMB Securities Research - 20 Nov 2019