Friday, September 23, 2011

KLK slips on downgrade, CPO futures below RM3,000

KUALA LUMPUR: Shares of KUALA LUMPUR KEPONG BHD [] (KLK) slipped on Friday, Sept 23, weighed down by the weaker crude palm oil (CPO) futures which fell below RM3,000.

At 11.26am, the FBM KLCI was down 16.37 points to 1,371.44, off the early low of 1,358. Turnover was 449 million shares valued at RM673 million. Losers beat gainers nearly six to one, with 582 losers to 106 gainers.

The CPO third month futures fell RM21 to RM2,988, lowest since Sept 6.

KLK bore the brunt of the selling, down 76 sen to RM20.44 with 467,200 shares done while its major shareholder Batu Kawan slipped 40 sen to'' RM15.04.

Hwang DBS Vickers Research said KLK's 4QFY11 earnings could drop 10% on-quarter. It said the FY11-13 earnings were revised by -2% and +1% after changes to CPO price and forex rate assumptions

'Rating cut to Hold, with revised TP of RM22.60 due to higher ERP in DCF valuation 4QFY11 earnings to fall 10% q-o-q. KLK's 4QFY11 FFB production could ease 1% q-o-q on fewer working days due to Eid festival and workers' biometric registration, as required by the government.

'Given 7% lower average selling prices on-quarter, 4QFY11 core earnings are expected to retreat by c.10%on-quarter. Contribution from manufacturing should moderate after record operating profit in the past two quarters, but we do not expect significant impact from a global economic slowdown,' it said.

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