17 February, 2022 BIMB Securities Research

Share Price RM25.60

Kuala Lumpur Kepong (KLK MK) Above BUY 

Results Review
Target Price ▲ RM28.40 +10.9%
A good start
Price Chart (RM)
Overview. KLK’s reported a higher core PBT of RM861.1m for 1Q22 (>100%
30.00 20.0%
yoy) vs. RM412.1m for 1Q21 on account of higher profit contribution from
plantation segments as margin rose to 57.5% from 46.5% in 1Q21 on higher 10.0%
20.00
production and ASP realised of CPO and PK. This was also due to higher
0.0%
contribution from manufacturing segment as well as stronger share of
10.00
results from joint ventures. On quarterly basis, core PBT actually dropped -10.0%
12% mainly due to absence of an equity profit of RM242m from an overseas
0.00 -20.0%
associate, Synthomer Plc. Feb-21Apr-21 Jun-21Aug-21Oct-21Dec-21 Feb-22
Against estimates: Above. 1QFY22 core net profit came-in above ours and KLK MK KLCI Rel. Performance
consensus’ estimates.
Share Performance (%) 1m 3m 12m
Outlook. We are optimistic on KLK’s long-term earnings growth prospect. We Absolute 27.1 14.5
17.4
believe plantation segment would continue to sustain its performance given vs FBM KLCI 13.9 20.7 11.9
CPO prices are currently trading above RM5,000/MT, whilst FFB production
Stock Data
is expected to grow significantly by 28% to 5.05m tonnes in FY22 after
Mkt Cap (RM m) 27,600.8
incorporating the newly acquired subsidiaries, IJM Plantations and PT Pinang Free float (%) 30.4

Plantations
Witmas Sejati. Conversely, for manufacturing segments, demand especially Issued shares (m) 1,078.2
in oleochemical products i.e., serving the household and personal care 52w H/L (RM) 25.92/18.52
products such as detergents, soaps and sanitisers, is expected to continue to 3m average daily volume 832,049

hold firm given increase in hygiene concerns worldwide, though margins Major Shareholders (%)
could narrow on higher feedstock price. BATU KAWAN 47.7
EPF 13.7
Our call. Maintain BUY with new TP of RM28.40 (RM25.30 previously) based
AMANAH SAHAM NASIONAL 8.2
on historical 3-yrs average P/B of 2.3x and BV/share of RM12.36. Given the
encouraging results, we revised our FY22/23F earnings forecast higher to Noorhayati Maamor
RM2.1b/RM2.0b from RM1.5b/RM1.4b previously as we revisit our ASP of noorhayatii@bimbsec.com.my
+60(3) 2613 1736
palm products, production, margins, costs and expenses to better reflect our
current and future expectations of KLK’s business operations. We raised our
production number by 5% to 5.05m/5.21m tonnes respectively for FY22/32
whilst raising average selling price forecast for CPO to RM4,016/MT for FY22
and RM3,400/MT for FY23 from RM3,725/MT-RM2,975/MT previously.

Table 1: Quarterly figures

Quarterly Change (%) Cumulative BIMB
FYE 30 September (RM m) 1QFY21 4QFY21 1QFY22 QoQ YoY FY21 FY22 % 2022F 3M/F
Revenue 4,299.8 5,934.5 6,828.9 15% 59% 4,299.8 6,828.9 59% 23,038.8 30%
EBITDA 687.8 1,102.6 1,235.6 12% 80% 687.8 1,235.6 80% 3,133.1 39%
EBIT 537.6 929.0 1,018.9 10% 90% 537.6 1,018.9 90% 2,336.6 44%
Pre-tax profit 493.9 880.0 955.1 9% 93% 493.9 955.1 93% 2,164.0 44%
Core PBT 412.1 973.7 861.1 -12% >100% 412.1 861.1 >100% 2,164.0 40%
Oil & Gas

Taxation (86.2) (184.3) (277.5) 51% >100% (86.2) (277.5) >100% (616.8) 45%
Equity

Minority interest (50.3) (69.8) (78.2) 12% 56% (50.3) (78.2) 56% (61.9) 126%
PATAMI 357.4 625.8 599.3 -4% 68% 357.4 599.3 68% 1,485.4 40%
Core PATAMI 275.6 719.5 505.3 -30% 83% 275.6 505.3 83% 1,485.4 34%
EPS (sen) 33.1 58.0 55.6 -4% 68% 33.1 55.6 68% 137.8 40%
Net gearing (x) 0.3 0.5 0.5 0.3 0.5 0.35
DPS declared (sen) 0.0 0.0 0.0 0.0 0.0
Implied pay-out (%) 0.0 0.0 0.0 0.0 0.0
EBITDA margin (%) 16.0 18.6 18.1 16.0 18.1 13.6
Core PBT margin (%) 9.6 16.4 12.6 9.6 12.6 9.4
Core Net Profit margin (%) 6.4 12.1 7.4 6.4 7.4 6.4
Effective tax rate (%) 17.4 20.9 29.1 17.4 29.1 28.5
Source: BIMB Securities, Company

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Table 2: Segmental breakdown

FYE September (RM m) 3-months FY21 3-months FY22 y-o-y
Plantation 567.1 1,106.6 95%
Manufacturing 3,541.0 5,513.3 56%
Property Development 53.4 56.0 5%
Investment Holding/Others 138.3 152.9 11%

Segment Result:
Plantation 239.0 607.9 154%
Manufacturing 183.7 319.6 74%
Property Development 22.0 18.8 -14%
Investment Holding/Others 22.2 23.9 7%

Margins:
Plantation 42.1% 54.9%
Manufacturing 5.2% 5.8%
Property Development 41.2% 33.6%
Investment Holding/Others 16.1% 15.6%
Source: BIMB Securities, Company

Table 3: Plantation Statistics

FYE September YTDFY22 YTDFY21 y-o-y 1QFY22 4QFY21 1QFY21 q-o-q y-o-y
FFB production (MT) 1,265,971 973,744 30.0% 1,265,971 1,007,401 973,744 25.7% 30.0%
CPO Production (MT) 314,901 210,715 49.4% 314,901 281,408 210,715 11.9% 49.4%
Rubber ('000 kg) 1875.3 2,543.7 -26.3% 1,875.3 2,169.8 2,543.7 -13.6% -26.3%
Crude Palm Oil (RM/MT) 4,063 2,703 50.3% 4,063 3,631 2,703 11.9% 50.3%
Palm Kernel (RM/MT) 2,864 1,716 66.9% 2,864 2,213 1,716 29.4% 66.9%

Source: BIMB Securities, Company

Table 4: Earnings forecast

FYE September (RM m) 2019 2020 2021 2022F 2023F
Turnover 15,534 15,596 19,916 25,220 23,994
EBITDA 1,480 1,916 3,378 3,865 3,503
Pre-tax profit 824 1,186 2,976 3,026 2,772
PATAMI 618 773 2,258 2,077 2,022
Core PATAMI 602 729 1,680 2,077 2,022
Consensus NP 1,660.9 1,503.3

EPS (sen) 57.3 71.7 209.4 192.7 187.6

PER (x) 44.7 35.7 12.2 13.3 13.6

DPS (sen) 45.0 50.0 55.0 55.0 55.0

Div. Yield (%) 1.8 2.0 2.1 2.1 2.1
P/B (x) 2.6 2.6 2.3 2.1 1.9

ROE 5.7 7.3 19.9 16.5 14.4

EBITDA margin 9.5 12.3 17.0 15.3 14.6
Pre-tax margin 5.3 7.6 14.9 12.0 11.6
Effective tax rate 21.0 27.7 17.6 28.5 24.0
Net Gearing (x) 0.40 0.31 0.40 0.32 0.24
Source: Bloomberg, BIMB Securities

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DEFINITION OF RATINGS
BIMB Securities uses the following rating system:

STOCK RECOMMENDATION
BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months.
TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain.
HOLD Share price may fall within the range of +/- 10% over the next 12 months
TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels.
TRADING SELL Share price may fall by more than 15% in the next 3 months.
SELL Share price may fall by more than 10% over the next 12 months.
NOT RATED Stock is not within regular research coverage.

SECTOR RECOMMENDATION
OVERWEIGHT The Industry as defined by the analyst’s coverage universe, is expected to outperform the relevant primary market index
over the next 12 months
NEUTRAL The Industry as defined by the analyst’s coverage universe, is expected to perform in line with the relevant primary market
index over the next 12 months
UNDERWEIGHT The Industry as defined by the analyst’s coverage universe, is expected to underperform the relevant primary market index
over the next 12 months

Applicability of ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are
only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry
investment ratings as we do not actively follow developments in these companies.

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