Review

• Kumpulan Fima Berhad (KFIMA)’s FY19 results came in within expectation. Excluding the RM23.6mn write-back of impairment loss on PPE, unrealised forex and other non-core items, FY19 core net profit declined by 7.1% YoY to RM33.1mn, accounting for 98% of our full-year earnings estimates. The weak earnings was attributed to lower contribution from the plantation segment.

• Manufacturing: Despite lower revenue (-4.3% YoY), FY19 PBT increased by 34.0% YoY to RM30.6mn. The increase was mainly due to more favourable sales mix and reversal of certain provisions.

• Plantation: Revenue decreased by 23.0% YoY to RM118.3mn, mainly dragged by lower sales volume and selling price of CPO and PK. CPO sales volume decreased by 6.6% YoY to 47k tonnes. The average selling price of CPO and PK decreased by 18% and 32% YoY to RM1,921/tonne and RM3,015/tonne, respectively. This division registered a higher PBT for FY19 as a result of RM23.6mn write-back of impairment loss on PPE. Excluding the write-back, PBT would have decreased by 70.9% YoY to RM9.2mn.

• Bulking: FY19 PBT increased by 78.2% YoY to RM44.4mn, underpinned by 51.6% growth in revenue. The commendable results were driven by higher contribution from most of products segments.

• Food: FY19 PBT surged by more than 100% YoY to RM8.3mn despite flat revenue. This is because forex gain of RM0.68mn have lifted the division’s PBT (vs FY18: forex loss of RM8.5mn).

• The group has declared a final dividend of 9sen/share for FY19, similar to FY18. This translates into dividend yield of 5.4%.

Impact

• We cut FY20 and FY21 earnings forecast by 6.5% and 7.7%, respectively, after lowering our revenue projections for the plantation and manufacturing division. Besides, we also introduce our FY22 earnings forecast of RM47.3mn.

Outlook

• Despite lower contribution from the plantation division, we see some improvement in the manufacturing division.

• Balance sheet remained healthy with RM240.3mn net cash as at 31 March 2019, translates into 85sen/share.

Valuation

• Maintain KFIMA’s DDM valuation at RM1.89/share. The TP implies a forward CY20 PER of 14.1x. We continue to like KFIMA for its decent dividend yield (5.4%) and strong balance sheet. Maintain BUY.

Source: TA Research - 31 May 2019