Kenanga Research has maintained an “Outperform” recommendation for Kuala Lumpur Kepong Bhd with a higher trading price of RM 26.50 (from RM23.60), based on FY22E PER of 20x, reflecting -1.0SD valuation.
The research house said that KLK is still our preferred integrated pick given; its FBMKLCI status, FFB and earnings boost from the new IJMP subsidiary, potential further acquisitions, attractive FY22E PER of 15.3x and stable monthly (1-year) foreign shareholding levels
It said that based on in-house ESG scoring, KLK ranks third with a score of 78%. “Risks to our call are a sharp decline in CPO prices and a significant rise in fertiliser/transportation costs.”
It said that while it anticipates a slip in FFB output, KLK’s upstream should continue to perform well in 1QFY22 on the back of firm QTD1QFY22 CPO price (+17% QoQ), as well as a stronger contribution from its subsidiary IJMP. Meanwhile, downstream could improve as consumption picks up ahead of year-end festivities.