16/09/2024 (The Edge Malaysia) - Johor-based oil palm planter and crude palm oil (CPO) miller Kim Loong Resources Bhd (KL:KMLOONG) - which is 62.84%-owned by the Gooi family that also controls property developer Crescendo Corp Bhd (KL:CRESNDO) - has clinched a place on The Edge Billion Ringgit Club (BRC) Awards winners’ list this year after a five-year hiatus.

Forbes Malaysia lists Kim Loong executive chairman Gooi Seong Lim, who is also chairman and managing director of Crescendo, along with his three younger brothers - managing director Seong Heen and executive directors Seong Chneh and Seong Gum - at No 39 on Malaysia’s top 50 rich list and estimates their net worth to be US$535 million as at April 2024. The brothers are also on Crescendo’s board.

Thanks to robust average CPO selling prices of RM4,898 per tonne in its financial year ended Jan 31, 2023 (FY2023), Kim Loong’s net profit surged to a record high of RM162.3 million, up 18.8% year on year (y-o-y) from RM136.6 million, when its CPO selling prices averaged RM4,488 per tonne. The robust showing is significantly above its net profit of only RM41.1 million in FY2020 and RM94.9 million in FY2021, when its average CPO selling price was RM2,118 and RM2,755 per tonne respectively.

According to The Edge BRC awards methodology, the three-year compound annual growth rate (CAGR) of Kim Loong’s risk-weighted net profit between FY2020 and FY2023 was a robust 43.6% — beating sectoral peers to clinch for the first time The Edge BRC award for the highest growth in profit after tax over three years for the plantation sector.

Kim Loong previously won the BRC award for highest return to shareholders over three years in the plantation sector in 2016, 2017 and 2018.

Kim Loong’s plantations cover 16,922ha, with 94% fully planted with oil palm. Of the planted area, about 75% consists of mature palms over six years old, 20% are younger palms under six years old, and the remaining 5% are still immature. The group also manages three palm oil mills strategically located near its plantations in Kota Tinggi, Johor, and in Keningau and Telupid, Sabah, with a combined processing capacity of 1.6 million tonnes of fresh fruit bunches (FFB) per year.

To fuel growth, Kim Loong says it is actively seeking new plantation land in Johor, Sabah and Sarawak. The company also plans to establish a new palm oil mill in Sarawak and is currently in the process of obtaining the necessary milling licence.

Its net profit declined 8.9% y-o-y to RM147.75 million in FY2024 even as CPO selling prices averaged lower at RM3,819 per tonne. Labour shortages, changes in biofuel policies and rising operating costs also contributed to the decrease in earnings, though some of the impact was partially offset by a 15% increase in FFB production and improved mill processing margins.

The lower profits notwithstanding, Kim Loong continued to reward shareholders. It declared a dividend of 13 sen per share for FY2024, representing a roughly 86% payout of profits attributable to owners, although it is lower than the 15 sen per share paid in FY2023 and 14 sen per share paid in FY2022, when CPO prices were much higher.

Still, Kim Loong notes that dividend yields have consistently outperformed conventional bank deposits in the past four years. For FY2024, the implied dividend yield was still a decent 6.37%, based on the closing price at the end of the financial year, even though it was lower than the implied yield of 8.38% in FY2023 and 8.24% in FY2022.

In the first quarter ended April 30, 2024 (1QFY2025), Kim Loong’s net profit rose 57% y-o-y to RM49.5 million, from RM31.5 million in 1QFY2024, on the back of a 6% rise in FFB production and a 13% rise in CPO production, with average selling prices up by 2% to 3%.

Kim Loong aims to boost its FFB production in FY2025 at least 5% above the 329,597 tonnes achieved in FY2024, on account of the better age profile of young palms, productive area and on-going replanting programme.

“As part of our plan to achieve long-term sustainability in FFB production, the group has resumed replanting activities since 2023 and targets to replant about 1,000ha per year in the coming years,” chairman Seong Lim told shareholders in Kim Loong’s 2024 annual report.

“As for the palm oil milling operations, the group targets to achieve a total processing throughput of 1.6 million tonnes of FFB in FY2025. As our biogas plant at Telupid has commenced supply of renewable energy to Sabah Electricity Sdn Bhd’s grid since December 2023, we expect this plant to contribute positively to revenue as well as profit from FY2025,” he said.

Although the movement of CPO prices has been volatile, Kim Loong expects average prices for FY2025 to be RM4,000 per tonne. “At this price point, the group is expected to continue to perform well in FY2025.

“The management will continue to practise vigilance in monitoring the impact of volatile pricing on our performance and take the necessary measures to mitigate exposure to such risk,” Seong Lim said.

https://theedgemalaysia.com/node/726659