Period 3Q12/9M12
Actual vs. Expectations
The 9M12 core net
profit of RM856m came in below consensus expectations but was in line with
ours. It made up only 63% of the consensus’ FY12 forecast of RM1.35b. Against ours,
it was 68% of our forecast of RM1.25b.
We believe the
consensus may have underestimated the severity of the tree stress effect in
1H12, which has caused a deeper than expected slump in the FFB production. Note
that we had lowered our FY12E FFB production estimate to 3.17m mt in our plantation
sector downgrade report earlier this month.
Dividends As
expected, no dividend was announced.
Key Results Highlights
YoY, the 9M12 core
net profit shrank 24% to RM856m as the plantation division’s EBIT declined 20%
to RM907m while the oleochemical division suffered a 49% drop in EBIT to
RM137m. (See details next page).
QoQ, the 3Q12 core
net profit improved 22% to RM259m as a good result from the combined non-plantation
EBIT (+92% to RM106m) that was more than enough to cover the lower earnings in
the plantation division (-26% to RM219m).
Outlook KLK
have better long term FFB growth among the big cap planters in the KLCI. Its
average age profile of ~11 years is the youngest as compared to IOICORP (~14
years) and SIME (~13 years) based on our estimate. However, this growth factor
is likely fully priced in, judging by its valuation of 17.8x PER of FY13
earnings (highest among the big cap planters).
Change to Forecasts
Maintaining FY12-13E
core net profit of RM1.25bRM1.39b based on FFB productions of 3.17m-3.53m mt
and avg. CPO price assumptions of RM3150-RM3100 for CY12-CY13.
Rating Maintain MARKET PERFORM
The flattish CPO
price outlook for FY13E at RM3100/mt (-2% YoY) should keep KLK’s share price
upside limited.
Valuation Maintain our TP of RM24.86 based on FY13E PER of
19.0x (+1SD from the 5-year average PER).
Risks Sustained CPO prices below RM3000/mt.
Lower than expected
margin from the oleochemical and property divisions
Source: Kenanga
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