- Maintain BUY on Kulim with an unchanged fair value of RM5.00/share,
which is mainly based on a FY13F PE of 16.5x. In spite of Kulim’s weak 1QFY12
results, we are keeping our positive stance on the group for its special dividend
of 80-93 sen/share.
- Kulim’s 1QFY12 results were below our, and consensus estimates.
We have reduced Kulim’s FY12F-FY13F earnings forecast by 10% to 14% to account
for lowerthan-expected FFB production from NBPOL (New Britain Palm Oil Ltd).
Earnings from the fast food division were also weak YoY in 1QFY12 due to losses
in the poultry division.
- Kulim’s plantation division in Malaysia recorded a 25.5% YoY
fall in EBIT in 1QFY12 while earnings of the plantation division in PNG shrank
59.3% YoY to RM114.6mil.
- In line with the earnings trend of the other plantation companies
in Malaysia, Kulim’s plantation division was affected by lower CPO price and
higher production costs. We estimate that fertiliser costs rose 15% to 20% YoY
in 1QFY12.
- The silver lining is that FFB production of Kulim’s plantation
division in Malaysia improved 4.6% YoY to 120,895 tonnes in 1QFY12. Average CPO
price realised was RM3,099/tonne in 1QFY12 versus RM3,244/tonne in 1QFY11.
- The decline in NBPOL’s plantation earnings was due to a fall
in FFB production. The amount of FFB processed declined 8.3% in 1QFY12 compared
with 1QFY11 as extremely high rainfall in West New Britain had affected harvesting.
- Oil extraction rate was also hit by the wet weather. At NBPOL
palm oil mills, oil extraction rate was 22.36% in 1QFY12 against 23.32% in
1QFY12.
- On a more positive note, NBPOL had locked-in to sell 168,000
tonnes of CPO at a forward price of US$1,105/tonne (RM3,426/tonne) for FY12F.
The volume of 168,000 tonnes is about 30% of NBPOL’s estimated FY12F CPO
production.
- Average CPO price realised by the PNG division was RM1,088/tonne
(RM3,331/tonne) in 1QFY12, 3.9% lower than the average price of US$1,132/tonne
(RM3,449/tonne) recorded in 1QFY11.
Source: AmeSecurities
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