KLK, Batu Kawan decline after posting weaker 3Q profits

KUALA LUMPUR (Aug 16): Kuala Lumpur Kepong Bhd (KLK) fell 20 sen or 0.81% to RM24.48 per share at mid-morning today, after posting a 53.8% decline in its third quarter (3QFY17) net profit, due to losses in its manufacturing segment.

The conglomerate, which has also business activities in the plantations and oleochemicals, was among the top three decliners on thin trades of 47,300 as at 11.20am.

Its year-to-date net profit (9MFY17) of RM801.03 million, which saw a reduction of 37.5% year-on-year, had come in below consensus expectations at 65%.

This led to cuts in target prices by TA Securities and Public Invest Research to RM26.18 per share and RM25.18 per share respectively.

CIMB Research, which maintained a “Hold” rating on the stock with an unchanged target price of RM27.15, said it remains positive on the plantations division due to expected higher fresh fruit bunches production.

“However, the group expects its oleochemical division to report lower profit in FY17, due to the write-down in the value of its stocks in 3QFY17, as well as the challenging and competitive market environment,” CIMB head of equity research for Malaysia, Ivy Ng, wrote in a report yesterday.

Another plantations giant, Batu Kawan Bhd, was also traded down some 14 sen or 0.74% to RM18.86 per share, on some 27,600 shares traded.

Batu Kawan had also posted a decline in its third quarter (3QFY17) net profit by 46% yesterday, to RM80.78 million.

Other plantation counters that topped the morning’s decliners were United Plantations Bhd, Genting Plantations Bhd and Sime Darby Bhd.

United Plantations had lost some 18 sen or 0.64% to RM27.9 per share, while Genting Plantations was down 8 sen or 0.76% at RM10.50 per share.

Meanwhile, Sime Darby was down 5 sen at RM9.33 per share.

This is likely due to expected weaker export numbers and the recent decline in crude palm oil prices, which saw Malaysian palm oil futures fall yesterday to RM2,633, its sharpest drop in a week, said Kenanga Research analyst Voon Yee Ping. — theedgemarkets.com

This article first appeared in The Edge Financial Daily, on Aug 16, 2017.

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