Review

• Kim Loong Resources Berhad (KIML)’s 3QFY25 results came in above expectation, primarily driven by stronger-than-expected margins. Despite a relatively flat revenue growth, Kim Loong Resources Berhad (KIML) recorded a 4.8% YoY growth in core net profit, reaching RM49.5mn in 3QFY25.

• Cumulatively, the core net profit grew by 12.3% YoY to RM137.5mn, supported by a 6.9% rise in revenue. This growth was primarily attributed to higher FFB production and higher palm oil prices.

• Plantation: For 9MFY25, the operating profit increased by 17.2% YoY to RM105.0mn, primarily driven by an 8.4% YoY rise in the price of FFB to average RM778/tonne. However, the FFB production declined by 1.0% YoY to 241.3k tonnes.

• Palm Oil Milling: For 9MFY25, the operating profit climbed 13.1% YoY to RM103.9mn, supported by improved processing margins and milling efficiency. Furthermore, the ASP of CPO rose 6.3% YoY to RM4,097/tonne.

• The group declared a special single-tier dividend of 5.0sen/share, which paid on 17 Dec 2024.

Impact

• We revise our FY25 and FY26 earnings forecasts upward by 16.0% and 2.0%, respectively, following better-than-expected 3QFY25 results and improved margins. Additionally, we are introducing our FY27 earnings forecast of RM142.8mn.

Outlook

• Management now expects FY25 FFB production growth to be around 3-5% lower than last year versus the previous guidance of 5% growth. This revision reflects a lower-than-expected production from the group’s estates in Sabah, particularly in the Keningau region.

• Meanwhile, the group resumed its replanting efforts in FY23 and plans to replant approximately 1,000ha in FY25, a significant increase from 350ha replanted in FY24. As of 9MFY25, the group has already replanted 900ha.

• Regarding the palm oil milling operations, the total FFB processing volume for FY25 is projected to reach approximately 1.6mn tonnes.

• We expect a more cautious outlook for CPO prices, influenced by softer exports and demand from major importing countries, along with an anticipated increase in global vegetable oil supply.

Valuation

• Maintain KIML as HOLD with a new TP of RM2.58/share, based on 16x CY25 EPS. We like KIML for its healthy balance sheet and net cash position, supporting a stable dividend yield of 5% - 6% per annum.

Source: TA Research - 30 Dec 2024