PETALING JAYA: A better-than-expected results season has led Apex Securities to keep its “buy” recommendation on Kim Loong Resources Bhd
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In a report, the research house said the plantations group’s core net profit (CNP) for the third quarter of 2025 (3Q25) stood at RM50mil while its nine-month (9M25) CNP came in at RM147.7mil which was above consensus.
Apex Securities said this was due to a better than expected crude palm oil (CPO) production which remained stable despite lower fresh fruit bunches (FFB) output.
The third quarter results stemmed from higher CPO realised price coupled with better milling margins, and despite lower FFB output, rising palm oil and FFB prices fuelled growth in the plantation segment.
Quarter-on-quarter (q-o-q), its CNP increased 26.5% as both plantation and milling operations’ 3Q25 earnings before interest and taxes (Ebit) elevated 13.8% q-o-q and 35.6% q-o-q to RM37.3mil and RM37.5mil respectively.
For next year, Kim Loong has cut its FFB growth target by 3% to 5% due to underwhelming production from its Sabah estate.
“Current FFB intake of 1.6 million tonnes under milling operation remains unchanged, hence we kept our CPO output growth forecast at 3.8% for financial year 2025 (FY25) and 1.7% for FY26,” it said.
Apex Securities said it raised its FY25 forecasts upward by 7% after tweaking the Ebit margin upwards by 2%, while keeping the FY26 to FY27 projections unchanged.
It added it will keep its “buy” recommendation on the plantation company with an unchanged target price (TP) of RM2.80.
The research house added that some of the risks for the group include European Union export ban and regulations, changing weather patterns, taxation and export duty in Indonesia affecting global supply, shortage of labour and rising operational cost.
Meanwhile, TA Research said it expects a more cautious outlook for CPO prices, influenced by softer exports and demand from major importing countries, along with an anticipated increase in global vegetable oil supply.
In its report, it said Kim Loong expects FFB growth next year to be between 3% and 5% lower than last year, due to their estate in Sabah’s low production.
However, TA Research said the group has resumed its replanting efforts in FY23 and plans to replant approximately 1000 ha in FY25, a significant increase from 350 ha replanted in FY24.
On its earnings, the research house said the 3Q results came in above expectation driven by stronger-than-expected margins despite a relatively flat revenue growth.
“For 9M25 in the plantation sector, the operating profit increased by 17.2% year-on-year (y-o-y) to RM105mil, primarily driven by an 8.4% y-o-y rise in the price of FFB to average RM778 per tonne,” it said.
For the palm oil milling, its operating profit climbed 13.1% y-o-y to RM103.9mil supported by improved processing margins and milling efficiency.
TA Research said it will revise its FY25 and FY26 earnings forecasts upward by 16.0% and 2.0%, respectively, as well as introduce its FY27 earnings forecasts of RM142.8mil.
The research house has maintained its “hold” call on Kim Loong with a TP of RM2.58 as it remains favourable for its healthy balance sheet and net cash position, supporting a stable dividend yield of 5% to 6% per annum.
