Good showing for Kim Loong’s performance in 1QFY22
KUCHING: Kim Loong Resources Bhd’s (Kim Loong) saw its net profit growing for its first quarter of financial year 2022 (1QFY22) by some 23.9 per cent year on year (yo-y) to RM28.4 million, boosted by the higher average selling prices of crude palm oil (CPO) and fresh fruit bunches (FFB).
TO note, the prices of CPO and FFB stood at RM3,991 per metric tonne (MT) and RM808 per MT respectively during the quarter versus RM2,505 per MT and RM449 per MT recorded in 1QFY21 that offset the weaker production.
Revenue for the quarter grew 55.2 per cent y-o-y to RM312.5 million.
Malacca Securities Sdn Bhd (Malacca Securities) said Kim Loong’s reported earnings made up to 31.7 per cent of its full year net profit forecast of RM89.6 million and 19.2 per cent of consensus forecast of RM148 million.
“Meanwhile, the reported revenue was at 31.2 per cent of our forecast of RM1 billion and 28.1 per cent of consensus forecast of RM894 million,” it said in its notes yesterday. “We deem the figures to be in line in view of the tapering in CPO prices in subsequent quarters.
“As of 1QFY22, Kim Loong’s total planted area stood at 15,874 hectares. During the quarter, the group continues to maintain a healthy tree profile, of which more than 50 per cent of the group’s palm trees will be able to generate sustainable earnings over the foreseeable future.”
To note, Kim Loong’s tree profile stands at 20 per cent immature, four per cent young mature, 37 per cent prime mature, 15 per cent old mature and 24 per cent pre-replanting.
In 1QFY22, its FFB production fell 20.6 per cent y-o-y to 56,920 tonnes, while CPO production fell by four per cent y-o-y to 63,777 tonnes. CPO extraction rate stood at 20.9 per cent in 4QFY21, which continues to outperform Malaysia’s average CPO extraction rate of 19.6 per cent over the same period underlying the group’s efficiency.
“Going forward, the acquisition of 2,722 acres of oil palm plantation land that may generate up to additional 30,000MT of FFB per annum is expected to be completed in 3Q21,” Malacca Securities added.
“We also note that that the palm oil milling and plantation operations of the are operating as usual during as KLR principal activities are classified as essential services during the implementation of Movement Control Order (MCO).
“While CPO prices has tapered from the recent peak, we expect the prices to remain alleviated, hovering above RM3,000 per MT amid the sustainable demand, particularly from China and India.”
At the same time, Malacca Securities said the tightening supply of soybean oil in US as well as weaker local CPO production will sustain current prices.
“With the reported earnings deemed to be within our expectations, we made no changes to our earnings forecast and we maintained our hold recommendation on Kim Loong with an unchanged target price of RM1.54 per share.
“Risks to our recommendation include fluctuations in CPO prices. The volatility of CPO prices is subject to weather conditions, demand (mainly from both China and India) and supply (from both Malaysia and Indonesia). The supply of soybeans could also affect CPO prices as both products are regarded as substitutes.
“Should the soybean price premium against the CPO price decline overtime, demand will shift to the former product and vice versa.”