Kulim (Malaysia) Bhd (Nov 29, RM3.68)
Maintain buy at RM3.56, with higher fair value of RM4.80 (from RM4.45): We maintain our “buy” call on Kulim, being the cheapest large-scale plantation company listed in Malaysia. Its nine-month results for the period ended Sept 30 continued to beat street estimates and were on track to hit or surpass our forecast of RM501.3 million, which appeared over-optimistic six months ago but very achievable now.
Based on our raised crude palm oil (CPO) price assumption of RM3,000 per tonne for CY12, Kulim trades at 8.9 times calendar year 2012 earnings. There will be an additional 13,687ha of plantation land in Kulim’s stable by mid-2012 from the acquisition of Johor Corp’s estates.
Kulim reported an unusually strong quarter, with net profit of RM171.1 million. The boost was a RM27.5 million gain from the disposal of quoted investments.
Stripping out this item, annualised nine-month core earnings would have been within our forecast, beating consensus by 11.6%. Plantations continue to drive Kulim’s earnings, making up 76.8% of its earnings before interest and tax (Ebit) year-to-date compared with 67.8% last year.
Malaysian plantations recorded a 65.7% rise in Ebit, driven by a 13.5% increase in production and 29.4% rise in average CPO price this year. Furthermore, average palm kernel price achieved was up by 63.5%. Its Papua New Guinea (PNG) operations showed a 122.1% jump in Ebit as production jumped 28% driven by improved yields at its acquired assets in the past three years, namely Ramu and Kula Plantations.
However, the plantation Ebit for Malaysia dipped by 25.8% quarter-on-quarter (q-o-q) while PNG was down by 18%. Malaysia plantation’s decline in Ebit was despite an 11.3% q-o-q increase in fresh fruit bunch production. PNG experienced a smaller decline in average CPO price of 1.2% q-o-q against 3.9% for Malaysia, suggesting more aggressive forward sales.
We maintain our earnings forecast for FY11 as Kulim appears very much on track to hit or surpass our forecast. There is room for consensus estimate to be raised as the street has been underestimating Kulim’s earnings growth this year. We are raising our FY12 forecast to RM504.8 million from RM434.3 million, factoring in higher average CPO price of RM3,000 per tonne compared with RM2,700 previously. — OSK Research, Nov 29
This article appeared in The Edge Financial Daily, November 30, 2011.
Maintain buy at RM3.56, with higher fair value of RM4.80 (from RM4.45): We maintain our “buy” call on Kulim, being the cheapest large-scale plantation company listed in Malaysia. Its nine-month results for the period ended Sept 30 continued to beat street estimates and were on track to hit or surpass our forecast of RM501.3 million, which appeared over-optimistic six months ago but very achievable now.
Based on our raised crude palm oil (CPO) price assumption of RM3,000 per tonne for CY12, Kulim trades at 8.9 times calendar year 2012 earnings. There will be an additional 13,687ha of plantation land in Kulim’s stable by mid-2012 from the acquisition of Johor Corp’s estates.
Kulim reported an unusually strong quarter, with net profit of RM171.1 million. The boost was a RM27.5 million gain from the disposal of quoted investments.
Stripping out this item, annualised nine-month core earnings would have been within our forecast, beating consensus by 11.6%. Plantations continue to drive Kulim’s earnings, making up 76.8% of its earnings before interest and tax (Ebit) year-to-date compared with 67.8% last year.
Malaysian plantations recorded a 65.7% rise in Ebit, driven by a 13.5% increase in production and 29.4% rise in average CPO price this year. Furthermore, average palm kernel price achieved was up by 63.5%. Its Papua New Guinea (PNG) operations showed a 122.1% jump in Ebit as production jumped 28% driven by improved yields at its acquired assets in the past three years, namely Ramu and Kula Plantations.
However, the plantation Ebit for Malaysia dipped by 25.8% quarter-on-quarter (q-o-q) while PNG was down by 18%. Malaysia plantation’s decline in Ebit was despite an 11.3% q-o-q increase in fresh fruit bunch production. PNG experienced a smaller decline in average CPO price of 1.2% q-o-q against 3.9% for Malaysia, suggesting more aggressive forward sales.
There will be an additional 13,687ha of plantation land in Kulim’s stable by mid-2012 from the acquisition of Johor Corp’s estates.
We maintain our earnings forecast for FY11 as Kulim appears very much on track to hit or surpass our forecast. There is room for consensus estimate to be raised as the street has been underestimating Kulim’s earnings growth this year. We are raising our FY12 forecast to RM504.8 million from RM434.3 million, factoring in higher average CPO price of RM3,000 per tonne compared with RM2,700 previously. — OSK Research, Nov 29
This article appeared in The Edge Financial Daily, November 30, 2011.
