KL Kepong : A more grounded view on CPO prices BUY
Maintain BUY with an unchanged RNAV-based fair value of RM12.60/share, based mainly on a CY09F’s PE of 15x in plantation earnings. Despite Kuala Lumpur Kepong Bhd’s (KLK) more grounded view on prices of crude palm oil (CPO) after our recent company visit, we are keeping our earnings forecast and BUY recommendation. View of the recent run-up in price of CPO is that it may have been a tad too fast and as such, the rally might not be sustainable. Despite this, at worst, CPO prices are expected to range between RM2,200/tonne to RM2,300/tonne, which is still decent. Operations-wise, KLK’s cash operating costs (excluding palm kernel) are currently between RM930/tonne to RM940/tonne. Fertiliser costs are holding up quite well and there is a possibility that it could rise going forward. Inventory write-downs from the manufacturing division are unlikely in 2QFY09 after 1QFY09’s RM34mil. But there is a possibility that there could be impairments for KLK’s subsidiary - Davos Life Science - in 4QFY09 depending on auditors’ view. As for KLK’s investments in Yule Catto, there may not be any provisions in 3QFY09 although Yule Catto’s share price as at end-March 2009 fell below its written-down cost of 55 pence/share. Yule Catto’s share price has since rebounded to 62 pence/share.
Others :
Economic Update : Inflation eases further, rate cut almost certain
QUICK TAKE
IJM Plantation : Expands landbank in Indonesia BUY
NEWS HIGHLIGHTS
Coastal Contracts : Positive on new orders this year
Fraser & Neave Holdings : More fizz in drinks mart after F&N-Coke split?
Carlsberg Brewery : Hunting for Asian acquisition
Malaysian Bulk Carriers : Upbeat on profit if shipping rate index remains at 1,700 level
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