KUALA LUMPUR: Kuala Lumpur Kepong Bhd (KLK) is expected to see improved earnings in its financial year 2024 (FY24) backed by higher fresh fruit bunches (FFB) output and lower unit costs.
RHB Research said KLK is targeting 14 per cent FFB growth for FY24, coming from all areas.
Given its two-month FY24 FFB growth of 7.5 per cent year on year (YoY), the company will need to play catch-up in the second half of FY24.
"We raise our FY24 forecast growth to 9.4 per cent (from 8.0 per cent), but maintain FY25 to FY26 forecasted growth of 3.0-6.0 per cent," it said in a note.
RHB Research said the FFB growth target does not include KLK's recently-acquired Indonesian assets, which are likely to contribute a further 2.0-3.0 per cent growth.
After accounting for the acquisition and new areas coming into maturity of 8,000-10,000 hectares (ha), the firm said KLK could still see an increase in mature hectarage in FY24, even after its targeted replanting of 10,000ha.
"The company acquired the two Indonesian plantation companies (6,371ha of planted landbank in East Kalimantan with an average age of nine to 16 years) in December 2023 for RM276.5 million.
"We believe the acquisition price is fair (at US$10,000-US$11,000/ha), after including debt to be assumed and deducting the estimated value of the 60 tonnes/hour palm oil mill," it said.
In addition, KLK expects FY24 unit production cost to be less than RM2,000 per tonne on the back of higher FFB production as well as reduction in fertiliser costs.
KLK's tender for fertiliser for 1HFY24 was 20-30 per cent lower YoY.
"We have projected a similar 10-15 per cent decline in YoY costs for FY24.
"We cut earnings by 2.0-9.0 per cent after reducing manufacturing margins and raising FFB assumptions.
"Stay Buy, with a new target price RM27.25 from RM27.50," it added.