MORNING CALL: 21/9/23

Although HLIB Research likes Kuala Lumpur Kepong, it maintained its “hold” recommendation on the stock

Transcript

00:00 This morning we're taking a look at Kuala Lumpur Kebung or KLK.

00:05 Hong Leong Investment Bank Research recently attended a virtual meeting with the company's

00:10 management.

00:11 Says it's keeping its old recommendation for now.

00:14 Target price, RM22.68.

00:16 The counter settled yesterday at RM21.44.

00:20 Some highlights from this meeting.

00:22 According to the research house, KLK cut its fresh fruit bunch output growth guidance to

00:26 6% at 5.3 million tonnes in FY23 amid slower than expected yield recovery.

00:33 Crude palm oil production cost is likely to have peaked by the third quarter and seasonally

00:39 higher fourth quarter fresh fruit bunch production will bring unit production cost lower.

00:44 Meanwhile, near-term challenges remain for the manufacturing segment on the back of weak

00:49 demand prospects in Europe.

00:51 The property segment is expected to remain stable though, supported by property launches

00:55 in small phases in its Ijok township of Caledonia.

00:59 HLIV says it continues to like KLK for its sustainability commitments, decent balance

01:06 sheet with a net gearing of 0.4 times as at end June and decent fresh fruit bunch production

01:11 growth.

01:12 But it believes further capital upside is capped by potential earnings dilution from

01:17 KLK's proposed acquisition of Bausted Plantations.

01:21 On the whole, analysts appear mixed on KLK, with recommendations coming in at 7 buy, 11

01:27 hold and 2 sell.

01:28 Average target price, RM23.50, that's 9.6% higher than the stock's last close of RM21.44.

01:36 -