KFIMA - Anticipated Reduction

PublicInvest

Publish date: Mon, 03 Sep 2012, 12:10 PM

Outperform | 12-Month Target Price RM3.21 | Current Price RM2.20 | Expected Return 46%

For 1QFY13, Kumpulan Fima Berhad (KFima) registered a decrease in revenue (-8.8% y-o-y, +7.4% q-o-q) to RM116.6m from RM127.8m in the previous year with PBT falling (-25.1% y-o-y, -6.9% q-o-q) from RM49.5m to RM37.1m. The reduction was mainly attributed to the group‟s plantation division affected by depressed global crude palm oil (CPO) prices and lower revenue from its oil palm production and processing activities.

Despite the reduction in 1QFY13 results, we remain bullish about KFima‟s performance going forward on the back of i.) a well-diversified business structure, ii.) potential expansion plans, iii.) sum-of-parts (SOP) valuation being undervalued coupled with its abundant free cash flow position which we estimate will continue to exceed the RM100m per annum benchmark. We thus maintain our Outperform recommendation at TP of RM3.21 with 46% upside also bearing in mind PBT has achieved 20.6% of our full year FY13F forecast earnings.

Sustainable prospects. We are positive on KFima‟s segments portfolio as the next phase of growth focused on its food division (revenue +34.9% y-o-y, +24.7% q-o-q) has begun to materialize through higher sales volume. The bulking division has also performed better (revenue +15.8%, PBT +29.6% y-o-y) from higher throughput of edible oil and base oil products. Management has expressed challenges in the economic environment ahead, with anticipated variation in the edible oil transshipment business arising from differential export duty structure between Malaysia and Indonesia. Assuming the reduction in throughput would be offset by increased transshipment activities in base oil and import of industrial chemical products, utilisation rates to would be maintained at the current levels.
Optimistic outlook on plantation contribution. KFima‟s expansion plans also focuses on growing its plantations division through continuous potential acquisition of brownfields. The division‟s current quarter results were poor, affected by its Indonesian subsidiary PT Nunukan Jaya Lestari‟s shortfall from lower sales volume of CPO (7,205mt at RM2,725/mt avg. selling price net of duty vs 12,586mt at RM2,738/m in 1QFY12) and no sales of crude palm kernel oil this quarter. In spite of this, we believe plantations as the third largest contributor to KFima‟s PBT (22% contribution) still has vast opportunities to contribute to KFima‟s performance in the long-run, as their trees are still at its early stages of maturity and some being new plantings.
Maintain Outperform. We continue to believe KFima is undervalued at FY13F forward PE multiple of 6x, trading at a discount to its peers. For a 5 core business structure company we maintain our view of further upward pricing opportunities towards our TP of RM3.21 with 46% upside.

Source: PublicInvest Research - 3 Sept 2012

KFIMA (6491)

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Be the first to like this. Showing 12 of 12 comments

kcfan

Bro kc Loh.may I know why impact you to make decision disposed Kfima? Basically I not hold any shares on this counter,just on home work review.Thanks in advance on your concern.

2012-09-03 13:42

KC Loh

Just making money bro :) when it dropped to 2.15 (I got in 2.17 :( ) , I smell money! Hehehe

Quick in-out on a safe fundamental stock. Don't want hold too big a position in stock market already but good opportunities like this cannot be ignored. systematically exiting before panic ensures if bear comes!

2012-09-03 13:48

kcfan

Good approach words on 'panic and bear market'.Is what we are waiting for ? Congrat on your capital gain.Let's OTK again....hehe

2012-09-03 14:08

KC Loh

Partially done only anyway. Remisier said not much volume unless I want sell lower. :(

Fundamentally sound shares, I can wait! :)

2012-09-03 14:10

aunloke

Good play ! How about your Mflour, would you apply he same reason to reduce ?

2012-09-03 14:15

KC Loh

No, not yet. This one will have to ride the bear market if it comes. I think got at good price vis -a-vis how it will eventually turn out. In position to capture more market share in future, at least that's what I see because steady relationship with the powerful al-bukhary conglomerate. This one, I will stay as an investor, not trader! :)

2012-09-03 14:20

pradeep

Brother KC LOH be careful of mflour you have to study this stock as it had right issue and bonus and also the earning.To my opinion after the bonus and etc the price need correction.

2012-09-05 23:07

aunloke

Pradeep, Huayang has dropped so much these few days that it has better value than Tguan; can take a look.

2012-09-06 12:14

tonylim

Aunloke you seems to have a Crystal ball beside you.

2012-09-09 12:55

aunloke

Xin li, huayang forward PE is about 4.5 whereas kfima is about 7.1 certainly huayang looks better, however, kfima may have a sudden increase in value if it takes over fimacorp ( this is what lots of ppl are waiting for) . There is no urgency in buying huayang for the price after its bonus issue may be linger at this lever but if kfima takes over fimacorp there will a jump in its price. Hope this may help.

tony, wish I have a crystal with me so that I can share with you all.

2012-09-09 15:45

Ram Cheong

i want to buy this crystal ball , where can i buy it . .......... if got it then i'll share for free with all of u . lol

2012-09-09 16:07

aunloke

Add all our sharing together , it may be a crystal ball.

2012-09-09 17:29

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