Stock Name: KULIM
Company Name: KULIM (M) BHD
Company Name: KULIM (M) BHD
| Research House: OSK | Price Call: BUY | Target Price: 5.47 |
We are maintaining Kulim as Buy, lifting our fair value to RM5.47 based on 13x FY12earnings. The FY11 numbers were a little below our forecast but we believe FY12will be a better year fuelled by contribution from Kulim's newly acquired estates in Malaysia. We are raising our profit forecast to factorin a more aggressive yield curve at its PNG plantations. The stock is poisedfor a rerating once the sale of QSR is completed in March or April, which willtransform Kulim into a purer plantation giant with more than 100k ha of plantedarea.
Undershooting ourforecast. Kulim's FY11 core earnings came in at RM472.5m, missing ourestimate of RM501.3m by 5.7% but met consensus forecast of RM480.0m. PNG-driven. New Britain Palm Oil (NBPO) continued to be the biggest contributor to Kulim'sprofits, accounting for an estimated 60.5% at net profit level. EBIT surged 95.8%, boosted by a 32.3% leap in FFB production and a 30.4% increase in realized CPO price. NBPOhad the benefit of full year contribution from its Kula Plantation acquired inApril 2010. Its FFB production, at 1.74m tonnes, was within our forecast but surpassedmanagement guidance by 8.6%.
Malaysia plantations.Production growth was slower than at PNG but still a commendable 15.5%. The realised CPO price of RM3,193 per tonne was close to the MPOBaverage. At EBIT level, the Malaysian plantations recorded a relativelymild 11.3% increase, which appears low compared against production growth andthe 22.6% rise in realized CPO price. We believe this was due to replantingcost, which it expensed off in its P&L. This segment should do well in 2012on the additional contribution from estates acquired from Johor Corp.Management expects FFB production to increase to 800k tonnes this year.
QSR's final days.The food & restaurants segment saw a mild 2.4% increase in EBIT. The saleof QSR should be completed in March or April, which should result in Kulim endingup with an additional RM1.2bn in itscoffers. There could also be a special dividend /capital repayment should Kulimfail to find any acquisition target.
Change in forecasts.We are tweaking up our forecast to RM531.0m for FY12 from RM504.8m previously,factoring in more aggressive yieldsfrom PNG. This leads to stronger production despite a smaller area due to replanting. We are also introducing our FY13 forecast ofRM600.3m. These forecasts assume that QSR remains in Kulim's stable. This planter is still one of the cheapest among the large Malaysian plantation companies.
Source: OSK188
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