Period  4Q13/FY13

Actual vs. Expectations KLK’s FY13 core net profit* of RM912m is in line at 98% of consensus forecast (RM927m) and 95% of our forecast (RM960m).

Dividends  As expected, a final single tier dividend of 35.0 sen was announced.

Key Results Highlights YoY, FY13 core earnings declined 19% as CPO prices slipped 20% to RM2275/mt. However, this is mitigated by 11% FFB growth to 3.61m mt and better downstream EBIT (+75% to RM329m).

 QoQ, 4Q13 core net profit improved 73% to RM283m due to seasonally stronger FFB volume (+23% to 922k mt) and better downstream EBIT (+53% to RM108m).

Outlook  FY14E’s outlook should improve due to improvement in CPO prices and good FFB growth of 8%.

Change to Forecasts Maintain our earnings forecast for both FY14E (RM1.23b) and FY15E (RM1.28b).

Rating Maintain MARKET PERFORM

 Although we expect better FY14E earnings, the recent jump in share price may have already reflected such anticipation.

Valuation  We raised our TP to RM24.80 from RM21.50 previously. Note that we have applied higher Fwd. PER of 21.2x (from 18.4x) on an unchanged CY14E EPS of RM1.17. Our new valuation of 21.2x Fwd. PER has been upgraded to +1.0SD (from +0.5SD) as we reckon KLK has the brightest FFB growth outlook among the big cap planters.

Risks to Our Call Lower-than-expected CPO prices.

 Lower-than-expected margin for downstream division.\

Source: Kenanga