News KLK announced that it has proposed to
undertake the Multi-Currency Islamic Medium Term Notes (MCIMTN) Programme of up
to RM1.0b.
RAM Ratings has assigned a preliminary long term rating of
AA1 to the MCIMTN with a stable outlook.
Comments Neutral on the news as we believe this will
be part of KLK’s normal business operation to refinance its existing loans with
attractive rates. Current short term debt is now RM1.1b.
Its current net gearing is still very comfortable at 8% as of
end-Mar and we
expect this to
continue in FY12E-FY13E.
Outlook Compressed
margin in the downstream division will likely continue throughout FY12-13E.
Forecast Maintaining
FY12-13E earnings of RM1.37b-RM1.43b.
We will adjust for the new interest rate effect upon loan
drawdown, although we already expect immaterial adjustments to earnings.
Rating Maintain
MARKET PERFORM
Unexciting FY12-13E earnings growth of 1%-4% will cap share
price upsides.
Valuation Maintaining TP of RM23.50 based on unchanged
Fwd PER of 17.5x on FY13E EPS of RM1.34.
Our 17.5x Fwd PER is based on +0.5SD of KLK’s 5-year
average.
Risks A sustained
drop in CPO prices.
Lower than expected margin from the downstream divisions.
Source: Kenanga
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