Comment: For anybody that is currency trading, endeavoring to estimate the place prices are likely to go next with confidence is the ultimate goal. The simple truth is all of the indicators worldwide can’t provide you any kind of warranty that exchange rate will move in the way they point. The simple truth is, that when forex trading, we are working with possibilities. The best way to discover the utmost success is to gain as much technical and fundamental information and facts together to generate your decision. Of course knowing what the experts thinks as within CIMB Research retains Hold call for KL Kepong can also lend weight towards the reasons for a trade therefore we are continuously searching at the thoughts of specialist traders from brokers right through to live trading room.
KUALA LUMPUR: CIMB Equities Research is maintaining its earnings forecasts, sum-of-parts based target price of RM27.15 and Hold call for Kuala Lumpur Kepong (KLK).
“We expect KLK’s share price to be supported by its strategic estate land bank in Malaysia,” it said on Tuesday.
KLK posted a 3% year-on-year improvement in its 1QFY9/18 core net profit, thanks to stronger manufacturing earnings.
“We excluded forex losses of RM22m, RM15m in provisions and write-off of inventories, RM2.6m surplus on disposal of quoted investments, and RM13.6m surplus on government acquisition of its land to arrive at the 1QFY18 core net profit.
“1QFY18 core net profit was broadly in line, making up 28% of our and Bloomberg consensus full-year estimates,” it said.
CIMB Research said plantation earnings before interest and tax (EBIT) (ex-forex impact) fell 20% year-on-year in 1QFY18, due mainly to lower average selling prices (ASPs) for crude palm oil CPO (-5% year-on-year) and weaker fresh fruit bunches (FFB) production (-2% year-on-year).
On a quarter-on-quarter basis, plantation EBIT (ex-forex impact) fell 2% as higher cost of production offset the lift from higher fresh fruit bunches output (+2.5%) and palm kernel prices (+15%).
KLK’s reported plantation EBIT for 1QFY18 included forex loss of RM29.7m on loans advanced and bank borrowings to its Indonesian subsidiaries (4Q/1QFY17: forex loss RM18.9m/ forex gain of RM44.4m).
Manufacturing segment posted close to a fourfold jump in EBIT in 1QFY18, thanks to stronger sales and improved profit margin as prices for its key raw materials (crude palm kernel oils) stablised and it booked an unrealised gain of RM26m on derivatives.
On quarter-on-quarter basis, manufacturing EBIT rose 67% due to improved margins recorded by its China and Europe oleo operations.
“KLK’s 1QFY18 FFB output fell 2% year-on-year, below its guidance of 5%-6% growth for FY18. However, we keep our 6% output growth projection as we expect FFB yields from its estates to pick up in the next three quarters.
It achieved average 1QFY18 CPO price of RM2,581 a tonne, below Malaysian Palm Oil Board’s (MPOB) average CPO price of RM2,612/tonne.
“We believe this was due to the export levy of US$50 a tonne incurred by its Indonesian estates,” it said.
KLK’s property unit saw 94% year-on-year drop in 1QFY18 EBIT due mainly to lower progress billings.
CIMB Research said KLK revealed that the decline in CPO prices was due to the recovery in FFB yields post El Nino, resulting in high CPO inventories and this impacted its plantation earnings.
“However, the group expects this to be partly offset by higher oleo contributions.
“We have assumed blended average CPO price of RM2,517 a tonne in our FY18 earnings estimates. Every RM100/tonne change in our CPO price assumption will impact our net profit forecast for FY18 by approximately 6%,” it said.