PETALING JAYA: Kim Loong Resources Bhd’s power generation business is expected to contribute to the group’s revenue for the current financial year ending Jan 31, 2022 (FY22).
According to UOB Kay Hian Research, Kim Loong’s management has projected RM5mil in revenue for FY22 from supplying power generated from its power plants in Kota Tinggi, Johor and Keningau, Sabah to the grid.
The Kota Tinggi mill has commenced supplying power of up to 1.8 megawatts (MW) per hour.
The Keningau mill, meanwhile, which will start this year, is slated to supply up to two MW per hour to the grid, the research house said in its latest report.
As for Kim Loong’s plantation operations, UOB Kay Hian Research said Kim Loong will continue with its replanting programme of about 1,000ha of oil palm trees per year during FY22-FY26 to replace its old oil palm trees.
The old oil palm trees are unable to produce a high fresh fruit bunch (FFB) yield.
However, the group targets to replant only 600ha in FY22, added the research house.
In terms of production, Kim Loong’s management expects an FFB production growth of about 10% year-on-year for FY22.
This is after taking into consideration the recent land bank acquisition and the impact of the ongoing replanting programme.
In February, Kim Loong took possession of 2,722 acres of oil palm plantation land, which was under acquisition from vendors, while pending the fulfillment of all conditions precedent set by the vendors.
The total land acquired was 2,862 acres.
This is equivalent to 8% of the group’s current planted area.
“The acquisition is expected to be completed in the third quarter of this year.
Kim Loong
“With the latest acquisition, an additional 30,000 tonnes of FFB could be produced.
“This is about 10% of its current FFB production,” UOB Kay Hian Research added.
On the group’s first-quarter FY22 results, the research house said Kim Loong’s net core profit of RM28mil for the period under review was within its expectations.
It said this was mainly supported by higher average selling prices and milling operating margins.
“The plantation segment remains healthy and milling operations have turned positive with high margins on the back of high external FFB supply and better pricing.”
UOB Kay Hian Research has also revised its earnings forecast by 10%-13% higher to RM167mil for FY22 and RM140mil for FY23, respectively.
This is after it adjusted the crude palm oil (CPO) price assumption to RM3,300 and RM2,800 per tonne for FY22 and FY23, respectively.
Having said that, UOB Kay Hian Research has downgraded Kim Loong to a “hold” with a lower target price of RM1.50 after rolling over to FY23 in view of the weakening CPO prices.
The share price catalysts for Kim Loong include higher-than-expected production growth and stronger-than-expected CPO prices, added the research house.