Professional Documents
Culture Documents
KL KEPONG
(KLK MK, KLKK.KL)
22 March 2016
BUY
Company report
(Maintained)
03 2036 2305
Price
Fair Value
52-week High/Low
RM24.18
RM25.10
RM24.78/RM19.60
Key Changes
Fair value
EPS
Unchanged
Unchanged
YE to Sept
Revenue (RMmil)
Net Profit (RMmil)
EPS (sen)
EPS growth (%)
Consensus net (RMmil)
DPS (sen)
PE (x)
EV/EBITDA (x)
Div yield (%)
ROE (%)
Net gearing (%)
Investment Highlights
FY18F
FY15
FY16F
FY17F
1,067.5
25,812.2
9.06
2.7
10.0
26.0
Major Shareholders
53.4
26.3
Price performance
Absolute (%)
Relative (%)
3mth
6mth
12mth
+7.5
+2.2
+8.9
+4.3
+7.4
+13.1
22 March 2016
KL Kepong
Liberia, 3.0%
Peninsular Msia,
27.7%
Indonesia, 53.0%
Sabah, 16.3%
UPDATES
FY16F FFB production growth could exceed our
assumption
We have assumed that KLKs FFB production would
improve by 1.8% in FY16F compared with 1.9% in FY15.
From October 2015 to February 2016, KLKs FFB output
rose by 7.2% YoY.
AmInvestment Bank Bhd
KL Kepong
22 March 2016
earnings in FY16F
Apart from the uptick in CPO prices, we believe that KLKs
plantation profits would also improve in FY16F on the back
of a turnaround in the earnings of the refineries in
Indonesia and a boost in palm kernel crushing profits. In
FY15, the refineries and palm kernel segment recorded a
small loss of RM2.4mil.
KLKs refineries in Indonesia have swung into the black
underpinned by lower feedstock cost resulting from the
implementation of the export levy in July 2015. We
estimate KLKs refining capacity at 990,000 tonnes
annually in Indonesia. Palm kernel crushing capacity is
about 200,000 tonnes per year.
Going forward, although the cost advantage of palm
refineries in Indonesia is expected to be eroded by the
imposition of export tax in April 2016 in Malaysia, we
reckon that the Indonesian refiners would still be able to
maintain their competitiveness.
We estimate the difference in the cost of CPO between
Malaysia and Indonesia at RM160/tonne or US$39/tonne
after the imposition of the 5% export tax in Malaysia vs.
RM285/tonne or US$70/tonne previously.
Manufacturing profit to sustain in FY16F
We have forecast KLKs manufacturing EBIT (mainly
oleochemical operations) to inch up by 2% in FY16F. We
have assumed that the units EBIT margin would remain
unchanged at 3.5% in FY16F.
In spite of plunging crude oil prices, which would affect the
selling prices of oleochemicals and rising palm prices,
which are expected to increase cost of production, we
believe that the manufacturing division would be able to
sustain its profitability. This is due to the timing of the
purchases of feedstock.
A large portion of KLKs oleochemical earnings in FY16F is
expected to be driven by the Malaysia and Europe units.
The oleochemical operations in Europe use palm oil-based
feedstock and a little bit of tallow. We think that
oleochemical earnings in China may not be exciting in
FY16F due to the slowdown in the countrys economy.
22 March 2016
KL Kepong
2014
2015
2016F
2017F
2018F
11,130.0
1,701.1
(335.8)
1,365.3
5.9
(51.3)
(2.2)
1,317.7
(285.0)
(41.0)
991.7
13,650.0
1,585.9
(387.7)
1,198.2
(2.4)
(61.2)
1,134.6
(250.6)
(14.1)
869.9
14,059.6
1,807.5
(405.0)
1,402.5
(2.6)
(96.6)
1,303.3
(273.7)
(20.6)
1,009.0
14,841.2
2,045.0
(454.4)
1,590.6
(2.9)
(112.3)
1,475.4
(309.8)
(23.3)
1,142.3
15,377.9
2,229.3
(503.8)
1,725.5
(3.2)
(120.4)
1,602.0
(336.4)
(25.3)
1,240.3
2014
2015
2016F
2017F
2018F
4,220.2
430.2
3,726.9
8,377.3
1,295.8
1,441.4
1,002.1
771.0
4,510.3
393.3
1,094.2
761.3
2,248.8
1,816.2
639.4
2,455.6
7,751.7
431.5
7.26
4,817.7
492.9
5,156.7
10,467.4
2,083.2
1,613.8
1,711.4
1,383.9
6,792.3
713.7
1,912.8
1,096.1
3,722.6
2,681.2
727.7
3,408.9
9,666.4
461.7
9.06
5,312.7
492.9
5,363.5
11,169.1
1,632.0
2,349.7
1,733.4
1,103.4
6,818.5
503.5
2,104.1
1,224.4
3,832.0
2,815.3
716.4
3,531.6
10,141.6
482.3
9.50
5,758.3
492.9
5,590.4
11,841.7
1,634.8
2,454.1
1,829.7
1,171.3
7,089.9
490.8
2,314.5
1,261.7
4,067.0
2,956.0
706.2
3,662.2
10,696.8
505.6
10.02
6,154.5
492.9
5,839.6
12,487.1
1,866.4
2,521.7
1,895.9
1,225.4
7,509.4
504.3
2,546.0
1,285.8
4,336.1
3,103.8
697.0
3,800.9
11,328.6
530.9
10.61
2014
2015
2016F
2017F
2018F
1,317.7
335.8
(937.4)
22.8
739.0
(754.5)
(66.3)
(341.4)
(1,162.2)
550.4
0.0
(614.8)
20.4
(44.0)
(467.2)
1,753.8
(21.8)
1,264.8
1,134.6
387.7
(1,433.5)
377.5
466.3
(730.0)
82.0
(89.8)
(737.8)
1,536.8
0.0
(635.6)
(22.3)
878.9
607.4
1,264.8
183.7
2,055.9
1,303.3
405.0
(839.0)
27.3
896.6
(400.0)
(178.2)
(522.6)
(1,100.8)
314.0
0.0
(533.8)
0.0
(219.7)
(424.0)
2,055.9
0.0
1,632.0
1,475.4
454.4
(560.0)
0.0
1,369.8
(400.0)
(196.0)
(524.9)
(1,120.9)
341.0
0.0
(587.1)
0.0
(246.1)
2.8
1,632.0
0.0
1,634.8
1,602.0
503.8
(492.8)
0.0
1,613.0
(400.0)
(215.6)
(527.4)
(1,143.0)
370.1
0.0
(608.5)
0.0
(238.4)
231.7
1,634.8
0.0
1,866.4
2014
2015
2016F
2017F
2018F
21.7
11.6
11.8
8.9
33.2
21.6
59.1
33
56
15
22.6
-6.8
8.3
6.4
25.9
22.1
55.2
46
49
22
3.0
14.0
9.3
7.2
18.7
21.0
52.9
45
70
15
5.6
13.1
9.9
7.7
18.2
21.0
51.4
45
70
14
3.6
9.0
10.4
8.1
18.5
21.0
49.1
45
70
14
Revenue
EBITDA
Depreciation
Operating income (EBIT)
Other income & associates
Net interest
Exceptional items
Pretax profit
Taxation
Minorities/pref dividends
Net profit
Balance Sheet (RMmil, YE 30 Sep)
Fixed assets
Intangible assets
Other long-term assets
Total non-current assets
Cash & equivalent
Stock
Trade debtors
Other current assets
Total current assets
Trade creditors
Short-term borrowings
Other current liabilities
Total current liabilities
Long-term borrowings
Other long-term liabilities
Total long-term liabilities
Shareholders' funds
Minority interests
BV/share (RM)
Cash Flow (RMmil, YE 30 Sep)
Pretax profit
Depreciation
Net change in working capital
Others
Cash flow from operations
Capital expenditure
Net investments & sale of fixed assets
Others
Cash flow from investing
Debt raised/(repaid)
Equity raised/(repaid)
Dividends paid
Others
Cash flow from financing
Net cash flow
Net cash/(debt) b/f
Forex
Net cash/(debt) c/f
KL Kepong
Published by
AmInvestment Bank Bhd (23742-V)
(A member of the AmBank Group)
15th Floor Bangunan AmBank Group
55 Jalan Raja Chulan
50200 Kuala Lumpur
Tel: ( 0 3 ) 2 0 7 0 - 2 4 4 4 ( r e s e a r c h )
Fax: (03)2078-3162
22 March 2016
The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in
this report may 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 AmInvestment Bank Bhd may from time to time have a position in or
with the securities mentioned herein. Members of the AmBank 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 f air 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 judgement as of this
date and are subject to change without notice.
Printed by
AmInvestment Bank Bhd (23742-V)
(A member of the AmBank Group)
15th Floor Bangunan AmBank Group
55 Jalan Raja Chulan
50200 Kuala Lumpur
Tel: ( 0 3 ) 2 0 7 0 - 2 4 4 4 ( r e s e a r c h )
Fax: (03)2078-3162
Benny Chew
SR VP Equity Research