23/06/2008 (The Star Online) - Despite a disappointing 2007, Standard & Poor's (S&P) is optimistic that Kulim (Malaysia) Bhd's oil palm plantation divisions will prosper this year.

“The weather in Malaysia has been good since the second half of 2007 and the recovery of fresh fruit bunches (FFB) yields has been strong,” it said in a recent research report.

Apart from Malaysia, Kulim also has plantations in Papua New Guinea and the Solomon Islands via its London-listed subsidiary, New Britain Palm Oil Ltd (NBPOL). “In Papua New Guinea and the Solomon Islands, FFB production at NBPOL's estates is projected to grow at 6% to 7% per annum on increasing harvesting area and improving yields,” said S&P.

Meanwhile, the company's manufacturing division also looks promising. Kulim is one of the world's largest oleochemical producers.

Strong global demand and low supply of oleochemical products, particularly pharmaceutical-grade glycerine, had kept prices high, allowing Kulim to pass on the higher feedstock costs to customers.

Kulim is also the controlling shareholder of fast food operator QSR Brands Bhd, which runs the KFC and Pizza Hut restaurants in Malaysia, Singapore and Brunei.

“The opening of new outlets in untapped areas in the region such as Cambodia, the introduction of new products and rising demand for fast food in today's fast-pace lifestyle will provide good growth opportunities,” said S&P.

Selling price adjustments and longer operating hours would was also an added boost, the research house added.

Kulim has been rated a “strong buy” by S&P, with a target price of RM12.90.