MARKET DEVELOPMENT
Affin Research Maintains Its \"Reduce\" on KL Kepong
Affin Research Maintains Its \"Reduce\" on KL Kepong
16/08/2013 (The Star) - Affin Research is maintaining its “Reduce” rating of Kuala Lumpur Kepong Bhd with a target price of RM19.46 on its good management and operational strength, despite the still weak crude palm oil average selling price (CPO ASP).
It said the weaker CPO ASP and fresh fruit bunches production are expected to cap its third quarter 2013 performance in its plantation division.
“CPO futures is rebounding after the USDA cut 201 3/14 soybean production and closing stocks estimates but have averaged only RM2,280 per metric tonne in the first six weeks of fouirth quarter 2013.
“Nevertheless, group profit should improve on-quarter in fourth quarter 2013 as fresh fruit bunches production is expected to increase by 18% on yield recovery,” it said.
It added KL Kepong’s profit outlook remains subdued until CPO prices recovers but its fresh fruit bunches growth is likely to exceed those of its larger peers for many years due mainly to consistent replanting and new planting programmes as well as more immature and young areas moving into prime age.
“The acquisition of a 51% stake in CPPL, which holds 44,342 ha of oil palm plantation land in Papua New Guinea, has also boosted the group’s total land bank to 295,463 ha and plantable reserves to 60,000 ha,” it said.
Affin noted the group currently has eleven resource-based manufacturing plants located in Malaysia, China and Europe with an expanded total capacity of 1.8 million metric tonne per annum, up from 1.6 million metric tonne per annum in 2012.
“Buoyed by strong sales in its 1,000-acre, RM4.2bil Bandar Seri Coalfields development, profit contribution from property development is rising.
“The division can also leverage on another 6,000 acres of valuable land in Sungai Buloh which the group has earmarked for property development,” it said.
It said the weaker CPO ASP and fresh fruit bunches production are expected to cap its third quarter 2013 performance in its plantation division.
“CPO futures is rebounding after the USDA cut 201 3/14 soybean production and closing stocks estimates but have averaged only RM2,280 per metric tonne in the first six weeks of fouirth quarter 2013.
“Nevertheless, group profit should improve on-quarter in fourth quarter 2013 as fresh fruit bunches production is expected to increase by 18% on yield recovery,” it said.
It added KL Kepong’s profit outlook remains subdued until CPO prices recovers but its fresh fruit bunches growth is likely to exceed those of its larger peers for many years due mainly to consistent replanting and new planting programmes as well as more immature and young areas moving into prime age.
“The acquisition of a 51% stake in CPPL, which holds 44,342 ha of oil palm plantation land in Papua New Guinea, has also boosted the group’s total land bank to 295,463 ha and plantable reserves to 60,000 ha,” it said.
Affin noted the group currently has eleven resource-based manufacturing plants located in Malaysia, China and Europe with an expanded total capacity of 1.8 million metric tonne per annum, up from 1.6 million metric tonne per annum in 2012.
“Buoyed by strong sales in its 1,000-acre, RM4.2bil Bandar Seri Coalfields development, profit contribution from property development is rising.
“The division can also leverage on another 6,000 acres of valuable land in Sungai Buloh which the group has earmarked for property development,” it said.