Review

• Kim Loong Resources Berhad’s (KIML) 3QFY23 results came in within expectation. Stripping out exceptional items, KIML’s core net profit fall 8.7%  YoY to RM35.9mn. The weak results were mainly due to lower profit contribution from the palm oil milling operation as a result of a lower average  CPO selling price.

• Cumulatively, 9MFY23 core net profit increased 21.8% YoY to RM125.2mn  on the back of a 22.4% increase in revenue. The commendable results were mainly due to higher palm oil prices in 1H.

• Plantation: 9MFY23 operating profit increased by 37.7% YoY to RM116.2mn,  attributable to a higher average FFB selling price at RM988/tonne (+23.7%  YoY) and FFB production (+3.2% YoY).

• Palm Oil Milling: 9MFY23 operating profit increased by 8.5% YoY to  RM81.6mn, mainly driven by a higher average CPO selling price of RM5,267  (+23.1% YoY). Meanwhile, CPO production increased by 3.3% YoY to 240.8k  tonnes.

• The group declared a special single-tier dividend of 5.0sen/share for the quarter under review.

Impact

• No change to our earnings forecasts.

Outlook

• Management expects the FY23 FFB harvest to increase by 7% YoY, and the total processing quantity could surpass 1.5mn tonnes.

• Meanwhile, management guided that the CPO production cost is expected to increase due to a surge in fertiliser cost, high inflation rate and revised minimum wages.

• Having said that, management expects the Group to perform well for FY23.

Valuation

• Maintain KIML as SELL with an unchanged TP of RM1.58/share based on 16x  CY23 EPS.

Source: TA Research - 29 Dec 2022