Share
Boost From Manufacturing
KL Kepong (KLK)’s 9MFY10 results were within our estimates as there is some room for plantation profits to improve in the final quarter to match our segmental forecast.
The manufacturing arm, on the other hand, performed strongly, prompting us to upgrade the segment’s forecast. We continue to like KLK’s solid management and the fact that it has many young trees to support its production growth. Its valuation, nevertheless, is not as attractive as we hoped at 19.7x and 17.2x forward earnings.
We would be buyers of KLK on a stock price correction. Maintain Neutral for now. Within projections. KLK’s 9MFY10 core earnings were within our expectation, making up 74.2% of our full-year estimate at RM898.8m but were slightly below consensus estimates of RM946.9m.
Plantation segment performed as expected. The segment registered profit of RM765.8m for the 9M period, which was largely within our expectation, taking into consideration the
fact that the September quarter should be the strongest in terms of profitability.
KLK realized an average price of RM2562 in the June quarter, which was slightly better than MPOB’s average price of RM2530 per tonne. The YTD price achieved was RM2390 against MPOB’s average of RM2464 over the period. Manufacturing stronger than expected.
It was this segment which surprised on the upside, with its 9M profit of RM111.9m surpassing our full-year forecast of RM91.4m. We are raising our forecast to RM150.8m for the segment for FY10 and FY11, factoring in stronger profit margin of 6%.
Retailing was profitable in June quarter. Crabtree & Evelyn was surprisingly profitable inthe June quarter, making a profit of RM4.7m against a loss of RM19.8m previously.
In a typical year, Crabtree & Evelyn is only profitable in the December quarter due to Christmas season sales. The profitable quarter probably suggests that the restructuring work KLK has carried out is starting to bear fruit.
Raising earnings forecast slightly. We are tweaking up our FY10 forecast to RM914.8m, up 1.8% from before. Our FY11 forecast is nudged up by 2.3% to RM1049.9m. Consequently, our target price, which is based on 15.5x CY11 earnings, is raised to RM15.80 from RM15.15 previously.
KL Kepong (KLK)’s 9MFY10 results were within our estimates as there is some room for plantation profits to improve in the final quarter to match our segmental forecast.
The manufacturing arm, on the other hand, performed strongly, prompting us to upgrade the segment’s forecast. We continue to like KLK’s solid management and the fact that it has many young trees to support its production growth. Its valuation, nevertheless, is not as attractive as we hoped at 19.7x and 17.2x forward earnings.
We would be buyers of KLK on a stock price correction. Maintain Neutral for now. Within projections. KLK’s 9MFY10 core earnings were within our expectation, making up 74.2% of our full-year estimate at RM898.8m but were slightly below consensus estimates of RM946.9m.
Plantation segment performed as expected. The segment registered profit of RM765.8m for the 9M period, which was largely within our expectation, taking into consideration the
fact that the September quarter should be the strongest in terms of profitability.
KLK realized an average price of RM2562 in the June quarter, which was slightly better than MPOB’s average price of RM2530 per tonne. The YTD price achieved was RM2390 against MPOB’s average of RM2464 over the period. Manufacturing stronger than expected.
It was this segment which surprised on the upside, with its 9M profit of RM111.9m surpassing our full-year forecast of RM91.4m. We are raising our forecast to RM150.8m for the segment for FY10 and FY11, factoring in stronger profit margin of 6%.
Retailing was profitable in June quarter. Crabtree & Evelyn was surprisingly profitable inthe June quarter, making a profit of RM4.7m against a loss of RM19.8m previously.
In a typical year, Crabtree & Evelyn is only profitable in the December quarter due to Christmas season sales. The profitable quarter probably suggests that the restructuring work KLK has carried out is starting to bear fruit.
Raising earnings forecast slightly. We are tweaking up our FY10 forecast to RM914.8m, up 1.8% from before. Our FY11 forecast is nudged up by 2.3% to RM1049.9m. Consequently, our target price, which is based on 15.5x CY11 earnings, is raised to RM15.80 from RM15.15 previously.
SHARE
