Firm CPO Prices is expected to remain above RM4,000/MT throughout 1H22, supported by the sustainable demand amid the gradual economic recovery, La Nina phenomenon till early 2022 and production constraints (mainly due to labour shortage) is likely to Keep Kim Loong Resources Bhd’s s prospects up.
Malacca Securities Sdn Bhd has reiterated its “BUY recommendation” on KLR, but with a slightly lower target price of RM1.94 (from RM1.95) after taking into consideration the recent minor dilution impact from the exercise of company warrants.
It said that its target price is derived by pegging a target PER of 14.0x to its FY23f EPS of 13.8 sen. The ascribed target PER is in line with the mid-sized planters average at around 13.5x-15.5x.
Meanwhile, it said that KLR has already taken physical possession of approximately 1,100-ha of palm oil plantation land at Sandakan, Sabah (1,040-ha are planted with mature oil palms) since February 2021. The move will generate close to 30,000 FFB per annum for FY23f.
Malacca Securities said that as of 3QFY22, KLR total planted area stood at 15,929-ha. During the quarter, KLR continues to maintain a healthy tree profile (Immature: 17%, Young Mature: 9%, Prime Mature: 36%, Old Mature: 15% and Pre-replanting: 23%).
This implies that more than 50% of the group’s palm trees will be able to generate sustainable earnings over the foreseeable future.