KLK HAS POTENTIAL TO BECOME TOP DEVELOPER

Firm has huge landbank, good balance sheet and director’s expertise, say analysts

PL A N TAT I O N - B A S E D Kuala Lumpur Kepong Bhd (KLK) has what it takes to morph into a top property developer. Analysts said KLK has a large tract of land near the city, good balance sheet and the expertise of executive director David Tan, who has helped turn IOI Corp into a top Malaysian developer.

They said when the property market turns more positive, this will boost the company’s earnings in the property division.

Bloomberg’s research arm, Bloomberg Intelligence, said KLK has a large landbank in addition to the 2,371ha it holds as development land.

It said KLK owns 68,182ha of plantation land in Peninsular Malaysia as well as 20,106ha in Johor and 4,245ha in Selangor, some of which is already primed for development.

“KLK’s 1,488ha Tuan Mee Estate, which is still an oil palm plantation, could become an extension to its Bandar Seri Coal- fields township development northwest of Kuala Lumpur.”

The development will likely be multi-decade given its size and distance from the city centre, it added.

Bloomberg Intelligence said KLK is pacing its property launches in the current oversupplied market, with a second phase of a new development 50km northwest of here, launched in June last year.

“Malaysian plantation companies are increasingly converting land into townships and KLK’s growing experience means it is unlikely to enter into another joint venture where it only supplies the land, such as Sierramas in 2000,” it said.

KLK’s unbilled sales in the property segment stood at RM121 million up to September 30 last year.

Analysts are also positive about KLK’s plantation segment in the long term.

Kenanga Research said KLK’s long-term prospects in its core plantation business also remain positive as the management continues its hunt for merger and acquisition targets.

“The group continues to be on the lookout for acquisitions in the upstream segment, with the preference for brownfield oil palm plantations with flat/low-lying land.”

Kenanga Research said these potential acquisitions, coupled with the group’s organic expansion, should support consistent earnings growth over the long term. In the near term, however, the research firm does not see any excitement given its average production outlook and competitive environment in the oleochemical segment.