Wednesday, February 9, 2011

RHB Research trims KL Kepong earnings forecast

KUALA LUMPUR: RHB Research Institute said after a stellar FY09/10, KL Kepong recorded a 10.4% on-yeaqr drop in production in 1QFY11, due mainly to the impact of wet weather which affected harvesting activities.

In its report issued on Wednesday, Feb 9 it said KLK was not alone as all Malaysian planters under its coverage recorded lower fresh fruit bunches (FFB) production during the quarter, ranging from -8% to as high as -23% on-year.

'Despite this, management is sticking to its 10% FFB growth target for FY09/11 for now, expecting productivity to improve in the next few quarters. We prefer to be more conservative, and are adjusting down our FFB yield projections by 0.5t/ha to 23-24t/ha for FY11-13 (from 24-25t/ha previously), resulting in FFB production growth of 8.5% for FY11, 4.7% for FY12 and 6.3% for FY13,' it said.

RHB Research said one bright spot is KLK's 22,787ha of rubber PLANTATION []s, which in FY09/10 yielded an operating profit per mature ha of RM6,718/ha (with average price of RM9.80/kg), not too far from its CPO division's RM7,061/ha.

It said given that rubber prices are now at RM16.73/kg, profitability for KLK's rubber division is expected to jump significantly in FY09/11, assuming prices stay at these levels. Based on our estimates, we project operating profit for the rubber division to almost double yoy in FY09/11, although contribution to total group profit will remain relatively small, at about 10%.

' We trim our forecasts by 8.1-9.6% for FY09/11-13. Post-earnings revision, we reduced our SOP-based fair value for KLK to RM25.95 (from RM27.35), but maintain our Outperform rating,' it said.

No comments:

Post a Comment