Review

• Kim Loong Resources Berhad’s (KIML) 4QFY23 results came in slightly below our expectations. Stripping out exceptional items, KIML’s core net profit increased by 20.7% YoY to RM37.2mn. The better results were mainly due to higher profit contribution from the palm oil milling operations, which helped offset weaker contribution from the plantation segment.

• Cumulatively, FY23 core net profit increased by 21.5% YoY to RM162.4mn on the back of 12.1% increase in revenue. The commendable results were mainly due to higher palm oil prices.

• Plantation: FY23 operating profit increased by 22.2% YoY to RM147.0mn, attributable to higher average FFB selling price at RM920/tonne (+10.6% YoY) and FFB production (+8.3% YoY).

• Palm Oil Milling: FY23 operating profit increased by 15.3% YoY to RM110.8mn, mainly driven by higher CPO production (+6.2% YoY to 331.0k tonnes) and average CPO selling price of RM4,898 (+9.1% YoY) as well as better processing margin.

• The group declared a special single tier dividend of 5.0sen/share for the quarter under review. This will bring the YTD total DPS to 15.0 sen.

Impact

• FY24 and FY25 earnings forecasts are revised upward by 18.4% and 20.4% after factoring in higher FFB production to be in line with management guidance.

Outlook

• Management expects FY24 FFB harvest to increase by 15% YoY as more replanted areas coming into maturity and a better age profile of young palms productive area.

• Meanwhile, for the palm oil milling operations, the total processing quantity is expected to maintain at least 1.5mn tonnes of FFB.

• According to management, the movement of CPO prices has become highly unpredictable. However, the management expects the average CPO price for FY24 could stand above RM4,000/tonne.

Valuation

• The target price for KIML is raised to RM1.75 (previously RM1.58) post earnings adjustments and the roll-forward of valuation base year to CY24 with unchanged PER of 16x. Maintain KIML as SELL.

Source: TA Research - 30 Mar 2023