KUALA LUMPUR: JF APex Securities Bhd has revised upwards its earnings forecasts for Kim Loong Resources Bhd
's FY18F and FY19F by 3% to 8% after adjusting for higher fresh fruit bunch production (FFB) growth and FFB intake.
It has upgraded the counter to Buy from Hold with an unchanged target price of RM4.59.
JF Apex said Kim Loong Resources Bhd's 9MFY18 Patami was above its and consensus expectations due to better-than-expected performance in its milling operation.
The research house said 3QFY18 on-quarter also experienced a slight drop in plantation operations with earnings before interext and tax (Ebit) inching down 1.3% given lower FFB production.
However, for the nine months of FY18, Ebit surged 60% on-yearwith plantation operation's Ebit doubling to RM85.9mil.
"Looking forward, the group expects FFB production to achieve a growth of 30% yoy under plantation operation and 0.25m growth in FFB intake under milling operation," said JF Apex Securities.
The research house also said it is positive on the proposed three-for-one share split as it will improve shares liquidity of the stock, with the theoretical adjusted market price being RM1.37.
There will also be proposed free warrants on the asis of one warrant for every 20 subdivided shares, with the tenure of the warrants being seven years. The exercise price is yet to be determined.
"Overall, we favour KLRB given its prudent management, judging from the consistent earnings performance posted by the group for the past few years as well as its generosity of management in rewarding shareholders.
"Looking forward, we opine that the catalyst for the stock would be the setup of new milling plant in Sarawak and expansion of its plantable land."
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