PublicInvest cuts forecasts on KL Kepong, lowers TP to RM22.20

KUALA LUMPUR: PublicInvest research has cut its FY19-2021 earnings forecasts on Kuala Lumpur Kepong Bhd as it lowered its sales forecasts for the manufacturing segment.

“Management sees weaker earnings for its plantation arm, dragged by the continuous poor CPO price performance,” the research house said in a note.

“Meanwhile, oleochemical segment is expected to see solid earnings in view of steady capacity utilization despite seeing volatile margins.

“Overall, it also guided that the company’s operational profits are likely to be lower for FY19.”

PublicInvest said it kept its neutral call on the counter but reduced its target price to RM22.20 from RM22.86 previously.

For 1HFY19, KLK’s core net profit of RM337.5mil, excluding foreign exchange gain and gain on derivatives, was 31.7% lower year-on-year and missed both PublicInvest’s and consensus estimates.

In 2Q, the group’s core earnings fell 9.7% y-o-y to RM159.6mil as an increase in the cost of production and weaker selling prices halved plantation earnings to RM100.9mil.

Meanwhile, the manufacturing segment would have seen better growth of 5.1% y-o-t to RM98mil if not for the fair vale changes arising from the outstanding derivative contracts.

Contribution from oleochemical segment fell from RM115.6mil to RM90.9ml while other manufacturing units returned to the black with a small profit of RM2.4mil.

Despite weaker sales, the property earnings were slightly higher at RM7.1mil.

Source: TheStar