Period 4Q12 and FY12
Actual vs. Expectations
The FY12 core net profit* of RM1.13b
was within both the consensus and our estimates. It made up 95% of the
consensus’ forecast of RM1.19b and 99% of our forecast of RM1.14b.
Dividends As
expected, a final single tier dividend of 50.0 sen was announced. Combined with
its earlier interim dividend of 15.0 sen, FY12 total dividend was at 65.0 sen,
implying decent 3.2% yield.
Key Results Highlights
YoY, the FY12 core net profit
declined 20% to RM1.13b due to a lower EBIT in the plantation division (-26% to
RM1.18b). Note that the CPO ASP was down 4% at RM2829/mt while the FFB production
was lower by 1% at 3.26m mt. We also believe that the production cost may have increased
by a minimum 15% due to higher labour and fertiliser costs. The downstream division’s
EBIT meanwhile declined 17% to RM188m as the EBIT margin was lower at 3.7% (FY11:
4.4%). We believe this was caused by the introduction of the Indonesian palm
oil export tax structure, which had dampened the margin for its Malaysian
downstream operation.
QoQ, the 4Q12 core
net profit increased 11% to RM287m as a surge in the FFB production to 914,335
mt (+25%) more than offset the lower CPO ASP of RM2778/mt (-8%). The downstream
division’s EBIT declined 39% to RM51m as the EBIT margin weakened to 4.2%
(3Q12: 6.3%), possibly due to weaker demand for oleochemical products from
Europe and China.
Outlook The CPO
price outlook has deteriorated. With the cargo surveyors’ exports data for the
first 20 days of Nov showing a decline by ~3%, we see a higher possibility now
of Nov MPOB’s inventory level to register another record high.
Change to Forecasts FY13E core net profit reduced by 10% to RM1.22b
after cutting FY13E CPO price forecast by 5% to RM2850/mt (from RM3000/mt).
Rating Downgrade to UNDERPERFORM
Possible FY13E
consensus earnings downgrade for KLK should cause pressure on the share price.
Valuation We have cut our Target Price to RM20.00 based on
an unchanged Fwd. PER of 17.5x on the lower FY13E EPS of RM1.15 (previously
RM1.28).
Risks Better than expected CPO prices.
Source: Kenanga
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