Kim Loong Resources Berhad’s (KIML) 3QFY24 results exceeded our expectations. The deviation was mainly due to higher-than-expected margins achieved. Stripping out exceptional items, KIML’s core net profit increased by 31.5% YoY to RM47.2mn on the back of an 11.5% rise in revenue.
Cumulatively, 9MFY24 core earnings fell 2.2% YoY to RM75.2mn in tandem with a 21.4% plunge in revenue.
Plantation: Despite higher FFB production growth of 19.5%, 9MFY24 operating profit declined 20.5% YoY to RM92.4mn. The weak results were mainly dragged by lower FFB selling price, down 27.3% YoY to an average of RM718/tonne.
Palm Oil Milling: Despite lower revenue (-21.3% YoY), 9MFY24 operating profit increased by 13.4% YoY to RM92.5mn, thanks to better processing margins. The average CPO selling price plunged by 26.8% YoY to RM3,853/tonne.
The group declared a special single-tier dividend of 3.0sen/share for the quarter under review.
Impact
We tweak our FY24 and FY25 earnings forecast higher by 14.4% and 16.5%, respectively, after factoring in the higher-than-expected 3Q results and better margins. We also introduce our FY26 earnings forecast of RM130.2mn.
Outlook
Management expects the FY24 FFB harvest to increase by 15% YoY as more replanted areas come to maturity and better age profile of young palms productive area.
Meanwhile, for the palm oil milling operations, the total processing quantity is expected to be at least 1.5mn tonnes of FFB for FY24.
The movement of CPO prices has become highly unpredictable. However, the management hopes the average CPO price will stay above RM3,800/tonne for FY24.
Valuation
The target price of KIML is raised to RM2.23/share (previously RM1.95/share) based on 16x CY24 EPS. With a total potential upside of more than 12%, we upgrade KIML to BUY from Hold.
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