Hot Stocks Batu Kawan, KLK fall on lower profit, rich valuation

by **Cals** Thu 21 Nov 2013, 18:06

Hot Stocks Batu Kawan, KLK fall on lower profit, rich valuation

Business & Markets 2013

Written by Zatil Husna of theedgemalaysia.com

Thursday, 21 November 2013 12:17

KUALA LUMPUR (Nov 21): Batu Kawan Bhd and associate Kuala Lumpur Kepong Bhd (KLK) were among top losers on the exchange today.

The decline came after the plantation firms reported lower profits for their fourth quarter ended September 30, 2013 (4QFY13).

At 10.36am, Batu Kawan fell 30 sen or 1.5% to RM19.70 while KLK declined 14 sen or 0.58% to RM23.86.

At 12.03pm, Batu Kawan changed hands at RM19.76. KLK was traded at RM23.84 at 12.04pm.

Yesterday, Batu Kawan said it posted a lower profit of RM125.4 million in 4QFY13, a 39% decrease from RM206.4 million a year earlier. This was due to lower contribution from KLK.

KLK said net earnings fell 39% to RM258 million from RM422.3 million due to lower crude palm oil (CPO) prices.

Both Batu Kawan and KLK plans to pay dividends of 40 sen and 35 sen respectively for the quarter under review. But that has not supported both stocks' prices today.

Target price (TP) upgrades for KLK had not helped either. Kenanga Research has revised upward KLK’s TP to RM24.80 from RM21.50 while maintaining its "outperform" call for the stock.

In a note, Kenanga said KLK has the brightest fresh fruit bunch (FFB) growth outlook among the big-cap planters.

“FY14E’s outlook should improve due to improvement in CPO prices and good FFB growth of 8%.

“Although we expect better FY14E earnings, the recent jump in share price may have already reflected such anticipation,” Kenanga said.

Meanwhile, RHB Research Institute Sdn Bhd raised KLK’s TP to RM22.43 from RM22.40 but reiterated its "neutral" call for the stock.

RHB kept its "neutral" recommendation on KLK's rich valuations.

“While KLK remains a solid, well-focused plantation company that we like, we deem its valuations too rich.

“The company’s existing as well as new downstream facilities that are expected to come onstream sometime in CY13 would help mitigate the effect of lower CPO prices on its upstream business," RHB said in a note.