BIMB SECURITIES RESEARCH

Friday, 25 May, 2012

MARKET INSIGHT

Result Review

PP16795/03/2013(031743)

Buy

Kuala Lumpur Kepong

Below

Hits by disadvantageous export duty

Stock Data
Bloomberg Ticker
Market Cap (RM'mn)
Issued shares (mn)
52-week high
52-week low
3-mth avg daily volume ('00)
Free Float
Shariah Compliant

KLK MK
23,656
1,068
26.76
15.30
10,364
38.72
Y

Share Performance (%)

Altman Z-score
7.15
YTD price chg
(2.38)
YTD KLCI chg
1.14
Beta
0.80
Major Shareholders
Batu Kawan Bhd
46.45%
EPF
12.40%
Van Eck Asst.
1.97%
1mth
(7.59)
(5.56)

Absolute
vs. KLCI

3mth
(5.62)
(4.98)

12mth
6.01
1.24

Financial Highlights
FYE 30 Sep
2010
2011
2012E
2013E
2014E
FFB Prod ('000mt)
3,176.1 3,289.0 3,365.7 3,674.5 4,024.9
Rubber Prod ('000kg) 21,125.4 20,847.4 20,467.1 20,689.2 20,446.9
Turnover
7,450.0 10,691.9 11,053.2 11,278.5 11,715.2
EBIT
1,416.9 2,119.4 1,849.1 2,129.6 2,273.0
Pretax profit
1,382.8 2,066.2 1,809.8 2,100.2 2,245.5
Net Profit
1,012.3 1,571.4 1,332.5 1,496.4 1,599.9
EPS (sen)
95.10 147.60 136.32 140.18 149.87
Gross DPS (sen)
60.00
85.00
80.00
90.00 100.00
Div Yield (%)
2.71
3.84
3.61
4.06
4.51
NTA/share (RM)
5.34
6.33
6.76
7.26
7.76
PE Ratio
23.30
15.01
16.26
15.81
14.79
EBIT Margin
Pretax Margin
Effective tax rate
ROE
ROA
Net Gearing (x)

19.02%
18.56%
22.82%
16.50%
11.40%
0.07

19.82%
19.32%
20.36%
22.79%
15.61%
0.06

16.73%
16.37%
22.50%
17.74%
12.00%
0.03

18.88%
18.62%
25.00%
19.14%
12.90%
0.01

19.40%
19.17%
25.00%
19.15%
12.99%
N. Cash

11.06%
-5.61%
12.53%
52.20%
55.84%
65.28%

3.55%
2.33%
-1.32%
-1.82%
43.51%
3.38%
49.57% -12.75%
49.42% -12.41%
55.23% -15.21%

9.18%
1.09%
2.04%
15.17%
16.05%
12.30%

9.53%
-1.17%
3.87%
6.74%
6.92%
6.92%

Growth Ratios
FFB
Rubber
Turnover
EBIT
Pretax profit
Net profit

Share Price Chart

Ng Keat Yung
nkyung@bimbsec.com.my
03-26918887 ext 181

Apr-12

Mar-12

Feb-12

Jan-12

Dec-11

Nov-11

Oct-11

Sep-11

Aug-11

Jul-11

Jun-11

KLKs registered higher revenue y-o-y to RM2.62bn.

However, net profit plunged more than 40.0% to
RM214.9m due to lower commodities prices, rising
production costs, and adverse environment in the
downstream division. EBIT margin plunged more than
9.0% while net margin fell below 10.0%. Revised
downward earnings estimates by 10.3% and 3.7% for
FY12 and FY13 respectively. Maintain BUY at RM22.16
with an upside potential of more than 13.0%.
Squeeze in margins. KLK registered revenue of RM2.62bn
for 2QFY12, 10.8% higher than RM2.37bn achieved in
2QFY11. Despite the favourable growth in revenue, the
Groups net profit plunged more than 40.0% to
RM214.9m. KLK attributed the decline to lower average
commodities selling prices, rising production costs, and
lower contribution from the oleo-chemical division. The
profit margin of oleo-chemical division had been impacted
by export duty advantage enjoyed by the Indonesian
players. The average commodities selling prices achieved
by the Group are as below:

CPO (RM/mt)
Palm Kernel (RM/mt)
Rubber (RM/kg)

2QFY11
3,041.00
2,324.00
14.55

2QFY12
2,803.00
1,650.00
11.72

%
-7.8
-29.0
-19.5

Revenue above, profit below. KLKs revenue was slightly

above our expectation, but profit margin was significantly
dampened by the disadvantageous business environment.
EBIT margin plunged more than 9.0pp to 12.6%, while net
margin fell to below 10.0%.
15 sen dividend. The Board has declared an interim single
tier dividend of 15 sen per share for FY12 which will be
th
paid on 8 August 2012. The stock will trade ex-dividend
th
on 12 July 2012.

26.3
25.3
24.3
23.3
22.3
21.3
20.3
19.3
18.3
May-11

Price:
RM22.16
Target Price: (+13.3%)RM25.10

View and Valuation. In view of the lower than expected

profit margins, we have trimmed down our earnings
estimates by 10.3% and 3.7% for FY12 and FY13
respectively. As a result, we lowered KLKs target price to
RM25.10 (from RM26.0 previously) which was derived
based on a 3-year average PE ratio of 18.1x over next 12
months EPS of 138.9 sen. Despite the lower target price,
we maintain the BUY rating subsequent to the recent
downtrend.

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25 May 2012

Results Review: KLK 2QFY12

Quarterly figures
FYE 30 Sep (RM'm)
Revenue
EBIT
Pretax profit
Taxation
Minority interest
Net Profit
EPS (sen)
Net gearing (x)
EBIT margin (%)
PBT margin (%)
Net margin (%)
Effective tax rate (%)

Mar-11 Jun-11 Sep-11 Dec-11

2,368.4 2,952.3 2,999.7 2,923.2
522.1
590.3
618.9
476.4
503.8
570.8
599.2
463.2
-107.02 -115.45 -123.38 -105.40
-22.96
-22.63
-15.26
-16.83
373.9
432.8
460.6
341.0
35.1
40.6
43.3
32.0
N. Cash N. Cash N. Cash N. Cash
22.05
20.00
20.63
16.30
21.27
19.34
19.98
15.85
15.79
14.66
15.36
11.66
21.24
20.22
20.59
22.75

Mar-12 QoQ Chg YoY Chg

2,624.2
-10.2%
10.8%
329.3
-30.9%
-36.9%
311.6
-32.7%
-38.2%
-80.96
-23.2%
-24.3%
-15.73
-6.5%
-31.5%
214.9
-37.0%
-42.5%
20.2
-37.0%
-42.5%
0.08
N/A
N/A
12.55
-23.0%
-43.1%
11.87
-25.1%
-44.2%
8.19
-29.8%
-48.1%
25.98
14.2%
22.3%

1HFY11
4,791.3
931.2
896.1
-181.84
-36.23
678.0
63.7
0.08
19.44
18.70
14.15
20.29

1HFY12
5,547.4
805.8
774.8
-186.36
-32.56
555.9
52.2
N. Cash
14.53
13.97
10.02
24.05

YTD Chg
15.8
-13.5
-13.5
2.48
-10.14
-18.0
-18.0
N/A
-25.3
-25.3
-29.2
18.5

Source: BIMB Securities

Income Statement
FYE 30 Sep (RM'm)
Revenue
EBITDA
Pretax profit
Tax
MI
Net profit
Net profit growth (%)
EPS (sen)
EPS growth (%)
DPS (sen)
Dividend yield (%)
NTA/share (RM)
Net gearing (x)
PER (x)
P / NTA (x)
ROE (%)
ROA (%)

2009
6,620.4
1,223.7
887.4
-244.8
-30.1
612.5
-41.1
57.5
-41.1
40.0
1.81
4.98
0.08
38.54
4.45
10.49
7.16

2010
7,450.0
1,471.5
1,382.8
-315.6
-54.9
1,012.3
65.3
95.1
65.4
60.0
2.71
5.34
0.07
23.30
4.15
16.50
11.40

2011
10,691.9
2,306.8
2,066.2
-420.7
-74.1
1,571.4
55.2
147.6
55.2
85.0
3.84
6.33
0.06
15.01
3.50
22.79
15.61

2012E
11,053.2
2,040.2
1,809.8
-407.2
-70.1
1,332.5
-15.2
124.8
-15.4
80.0
3.61
6.76
0.03
17.75
3.28
17.74
12.00

2013E
11,278.5
2,351.2
2,100.2
-525.0
-78.8
1,496.4
12.3
140.2
12.3
90.0
4.06
7.26
0.01
15.81
3.05
19.14
12.90

2014E
11,715.2
2,514.2
2,245.5
-561.4
-84.2
1,599.9
6.9
149.9
6.9
100.0
4.51
7.76
N. Cash
14.79
2.86
19.15
12.99

Source: BIMB Securities

Balance Sheet
FYE 30 Sep (RM'm)
Current assets
Non-current assets
Total Assets

2009
3,189.1
5,415.2
8,604.3

2010
3,395.1
5,768.5
9,163.5

2011
4,777.5
6,192.4
10,969.9

2012E
4,737.0
6,496.4
11,233.4

2013E
5,115.0
6,858.7
11,973.7

2014E
5,454.4
7,210.3
12,664.7

Current liabilities
Non-current liabilities
Shareholders' fund
Minority interest
Equity & liabilities

1,243.6
1,418.0
5,634.0
308.8
8,604.3

1,269.7
1,568.5
6,005.2
320.1
9,163.5

2,507.5
996.2
7,073.6
392.4
10,969.9

1,840.6
1,423.2
7,552.1
417.6
11,233.4

1,916.1
1,524.1
8,087.7
445.8
11,973.7

1,940.5
1,630.5
8,620.1
473.6
12,664.7

Source: BIMB Securities

www.bimbsec.com.my

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25 May 2012

Results Review: KLK 2QFY12

DEFINITION OF RATINGS
BIMB Securities uses the following rating system:
STOCK RECOMMENDATION
BUY
Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months
OUTPERFORM
The stock is expected to perform ahead of the market in the next 12 months
TRADING BUY
The stock is expected to outperform the market in the next 3 months
NEUTRAL
The stock is expected to perform in line with the market in the next 12 months
TRADING SELL
The stock is expected to underperform the market in the next 3 months
SELL
An expected price depreciation of more than 10% in the next 12 months
SECTOR RECOMMENDATION
OVERWEIGHT
The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market
index over the next 12 months
NEUTRAL
The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary
market index over the next 12 months
UNDERWEIGHT
The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market
index over the next 12 months
Applicability of ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings
are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do
not carry investment ratings as we do not actively follow developments in these companies.
Disclaimer
The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information
purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB Securities SdnBhd
may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may
provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was
obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are
accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such.
No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report
constitute our judgements as of this and are subject to change without notice. BIMB Securities SdnBhd accepts no liability for any direct,
indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X)

A Participating Organisation of Bursa Malaysia Securities Berhad
Level 32, Menara Multi Purpose, Capital Square,
No. 8 Jalan Munshi Abdullah,
50100 Kuala Lumpur
Tel: 03-2691 8887, Fax: 03-2691 1262
http://www.bimbsec.com.my

www.bimbsec.com.my

Kenny Yee
Head of Research

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