Wednesday, October 27, 2010

RAM Ratings revises KL Kepong's rating outlook to positive

KUALA LUMPUR: RAM Ratings has reaffirmed the respective long- and short-term ratings of KUALA LUMPUR KEPONG BHD []'s (KLK or the Group) RM500 million Sukuk Ijarah Commercial Paper/Medium-Term Notes Programme (2007/2012) at AA2 and P1.

Concurrently, the long-term rating outlook has been revised from stable to positive.

In a statement on Wednesday, Oct 27, RAM Ratings' head of real estate and CONSTRUCTION [] ratings Shahina Azura Halip said the positive outlook was premised on KLK's healthy and sustainable track record in its balance sheet and debt coverages.

"KLK's sturdy business and financial profile reflects the Group's entrenched position in the PLANTATION [] industry and its strong cost management," she said.

KLK is one of the largest established plantation players, with more than 250,000 hectares of plantation land bank in Malaysia and Indonesia, said the rating agency.

Its established track record in the plantation sector is reflected in its commendable operating efficiencies and lean cost structure ??? its production cost has remained competitive vis-??-vis other plantation players rated by RAM Ratings. The group's ratings are also supported by its resilient balance sheet, strong cashflow-generating ability and healthy liquidity profile, it said.

"Moving ahead, KLK's performance will remain supported by continued demand for crude palm oil from growing food consumption and the expanding world population.

"On the other hand, KLK's ratings are moderated by its large risk appetite which is driven by the capital-intensive nature of oil palm replanting and new planting expenditure, landbank expansion particularly in Indonesia as well as expansions into the specialty oleochemical segment," it said.

Other moderating factors include the inherent cyclicality of the plantation, property and retail sectors; the challenging oleochemical business and the operational risk from foreign ventures, it said.

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