Period 1Q13
Actual vs. Expectations
The 1Q13 core net profit of RM259m was
below the consensus as it made up only 21% of the consensus forecast of
RM1.21b. However, it was within our estimate (24% of our forecast of RM1.07b).
We believe that the
consensus may have overestimated the CPO price performance in 1Q13, which had
weakened from Oct onwards due to an inventory surge.
Dividends As
expected, no dividend was announced.
Key Results Highlights
YoY, the 1Q13 core net profit declined
33% to RM259m due to a lower EBIT in the plantation division (-31% to RM269m).
Although the FFB production improved 20% to 1.08m mt, the CPO ASP decline of
13% to RM2395/mt has affected the earnings more. The manufacturing division’s EBIT
was better at RM67m (1Q12: RM5m) due to better sales volume and improved
margins from fatty acids and fatty alcohols but its total contribution to KLK’s
EBIT is smaller at 18% against the plantation division’s 73%.
QoQ, the 1Q13 core
net profit declined 10% to RM259m as low CPO prices (-14% to RM2395/mt) more than
offset the better FFB production (+18% to 1.08m mt). The manufacturing
division’s EBIT increased 30% to RM67m due to improved margins from fatty acids
and fatty alcohols. However, as highlighted above, the manufacturing division’s
contribution to KLK’s EBIT remains smaller than plantation.
Outlook We are
less optimistic on the CPO price outlook (as against the consensus) and expect
a CY2013 average CPO price of only RM2500/mt (consensus: RM2950/mt). As the
plantation division’s earnings made up 80% of KLK’s earnings in FY12, the
group’s earnings should decline 5% in FY13E.
Change to Forecasts Maintaining FY13E core net profit of RM1.07b.
Rating Maintain UNDERPERFORM
The possibility of a
downgrade in the consensus FY13E earnings for KLK should cause pressure on the
share price.
Valuation Maintaining our Target Price of RM19.30 based on
an unchanged Fwd. PER of 18.4x on the CY13E EPS of RM1.05.
Risks Better
than expected CPO prices.
Source: Kenanga
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