MIDF Research optimistic on KLK’s outlook, revises up target price to RM29.22

KUALA LUMPUR, Aug 19 — MIDF Research remained optimistic on Kuala Lumpur Kepong Bhd’s (KLK) outlook, premised on the favourable business environments in the plantation and manufacturing divisions as well as its acquisition of IJM Plantations Bhd (IJMP).

The acquisition is expected to be completed by the fourth quarter of 2021 (Q4 2021), the research house said in a note today.

It noted that the profit contribution from KLK’s plantation segment is expected to be resilient, underpinned by the expected high average selling price of crude palm oil (CPO) and palm kernel.

“However, we are concerned about the contraction in the fresh fruit bunch production.

“While production is expected to improve seasonally, it could still come lower in comparison with the previous year, mainly due to the unresolved labour shortages,” said MIDF Research.

It said downside risks to its call include a sharp decline in CPO prices, lower-than-expected demand and implementation of stricter movement control order rules.

“All factors considered, we are maintaining our ‘buy’ recommendation on KLK, with a revised target price (TP) of RM29.22 from RM28.90,” it said.

On Wednesday, KLK announced that its net profit surged to RM783.94 million in Q3 2021 ended June 30, 2021, from RM368.7 million a year earlier, while revenue rose to RM5.17 billion from RM3.71 billion year-on-year.

The company attributed its performance to better profits from its plantation, manufacturing and property development segments. 

At 10.45am today, KLK’s shares advanced 30 sen to RM20.18 with 163,100 shares traded. — Bernama

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