KMLOONG Updates – 11 Jul 2017

KMLOONG Analysis File – http://wp.me/a17Hxk-2He

In my opinion, KMLOONG is overvalued where its fair value range from 3.2 to 3.4.

At 3.9 (11 Jul 2017),

  1. if based on fair value projection for FY17, investors assume CPO production of KMLOONG is 289,634MT and average selling price of CPO is 2,782-2,882. However, in FY17, the actual CPO production is 250,197MT and average selling price of CPO is 2,682. This is a strong signal of overvalue.
    KMLOONG Sensitivity 2
  2. if based on fair value projection for FY19, investors assume CPO production of KMLOONG is 355,448MT which is unrealistic for the size of plantable area owned by KMLOONG. This is a strong signal of overvalue.

KMLOONG Sensitivity

As of now, I won’t consider to accumulate KMLOONG, and offload KMLOONG gradually. CPO industry is cyclical, so no point to hold for long term.

Join my FB group: https://www.facebook.com/groups/285121298359919 for more collaboration.

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KMLOONG – Fundamental Analysis (4 Jul 2016)

Excel – Download the analysis file

Latest Financial – Q1 2017 Financial Report (29 Jun 2016)

FY17 Q1 Results Highlight:

  • KMLOONG recorded a higher revenue at RM177.70 million (Q1FY16: RM162.88 million) but a lower PBT at RM18.41 million (Q1FY16: RM23.23 million)
  • The revenue and net profit from plantation operations dropped by -3% and -15% YoY respectively. This was mainly caused by lower production but cushioned by better FFB price. The FFB production for Q1FY17 was 52,500 MT, +18% YoY (Q1FY16: 64,200 MT). The significant drop in production was likely caused by the El Nino phenomenon. The plantation operations did not face problem in selling its FFB production as most of the produce was supplied to mills within the Group. The average FFB price was +19% YoY.
  • Due to higher selling prices, the revenue for Q1FY17 increased by +10% YoY. However, the profit was RM8.24 million which was -25% YoY. The drop in profit was partly caused by lower OER and lower FFB intake arising from competition for crop in view of low FFB production during Q1FY17. Total CPO production for Q1FY17 was 51,400 MT, -18% YoY (Q1FY16: 62,300 MT).
  • The sale of CPO, the main product was 58,700 MT, -2% YoY (Q1FY16: 59,900 MT). The average prices of CPO was RM2,480 per MT for Q1FY17, +12% YoY.

Going Forward:

  • KMLOONG maintains high dividend yield.
  • I believe that CPO price will remain stable in 2016.
  • In FY17, an increase in FFB production from young mature area is expected but in view of the potential effects being caused by El Nino, the FFB production will be flat or slightly lower, while the CPO production could be lower, comparing to the quantity achieved in FY16.
  • In my opinion, in near term, the fair value of KMLOONG range from 3.3 to 3.5. Uncertainty risk of fair value is HIGH.
  • I will continue to hold and accumulate KMLOONG if there is a big discount.

At the time of writing, I owned shares of KMLOONG.

KMLOONG – Fundamental Analysis (23 Jun 2016)

Excel – Download the analysis file

Latest Financial – Q4 2016 Financial Report (29 Mar 2016)

FY16 Q4 Results Highlight:

  • The revenue and profit before tax of the Group were recorded marginally lower at RM757.73 million and RM107.58 million respectively for FY16, as compared to RM774.93 million and RM118.86 million respectively for FY15.
  • In FY16, total plantation land holdings stood at 15,905 Ha of which 94% are fully planted with palms. From the total planted area, approx. 84% are mature above 6 years old, 8% are young mature below 6 years old while the remaining 8% are at immature stage. The plantations are located in the states of Johor, Sabah and Sarawak. During the year, the Group has replanted about 400 Ha of its oil palm plantation in Sabah and expects to replant another 1,200 Ha of old palms age 20 years and above over the next 3 years.
  • In FY16, KMLOONG achieved a throughput of 1.33 million MT of FFB inclusive of the external crop purchases, an increase of 13% from FY15. CPO and PK production increased to approximately 297,000 MT and 67,000 MT respectively in FY16, from 265,000 MT and 60,000 MT in FY15. The average OER and KER were marginally lower at 22.28% and 5.02% respectively as compared to 22.39% and 5.09% in FY2015.

Valuation:

  • In my opinion, in near term, the fair value of KMLOONG range from 3.3 to 3.5. Uncertainty risk of fair value is HIGH.

KMLOONG-FY16Q4-Football-Field

Going Forward:

  • KMLOONG is not only a good counter for trading, but it maintains high dividend yield too. I am not sure it can maintain high dividend yield if CPO prices continue at low range.
  • The CPO price moves in a cyclical manner. In a worst case scenario, KMLOONG, a net cash company with a low cost of production and an experienced management team would be able to withstand the turbulence and even take up expansion opportunities.
  • I believe that
    • CPO price will remain stable in 2016
  • In FY17, an increase in FFB production from young mature area is expected but in view of the potential effects being caused by El Nino, the FFB production will be flat or slightly lower, while the CPO production could be lower, comparing to the quantity achieved in FY16.
    KMLOONG FFB POP 23Jun2016

    KMLOONG CPO POP 23Jun2016

  • I just accumulated KMLOONG recently.

At the time of writing, I owned shares of KMLOONG.

KMLOONG – Fundamental Analysis (1 Jul 2015)

KMLOONG Analysis:-

Excel – http://1drv.ms/1LDe7np

Notes – http://tinyurl.com/ofregj3

My View:-

  • Valuation:
    • 5-Y DCF:
      • Good Scenario (0.0% 2.0%): From 3.87 to 4.10 (Uncertainty Risk: LOW to MEDIUM)
      • Base Scenario (-2.0%): 3.66 (Uncertainty Risk: MEDIUM)
      • Bad Scenario (-6.0% -4.0%): From 3.27 to 3.46 (Uncertainty Risk: MEDIUM)
      • Ugly Scenario (-10.0% -8.0%): From 2.93 to 3.09 (Uncertainty Risk: HIGH)
      • At current price (2.77), based on RDCF, assumption of FCFF growth rate in the next 5 years is -12%.
      • Considering the factors surrounding this sector and this company, I think the assumed FCF growth may not supported by future earnings. I will take the bad/ugly scenario into consideration.
    • Absolute EY%
      • Trailing:
        • FY15 (EPS: 0.238) – From 3.00 to 3.54 (Uncertainty Risk: MEDIUM to HIGH)
        • R4Q (EPS: 0.199) – From 2.51 to 2.96 (Uncertainty Risk: HIGH to VERY HIGH)
      • Forward:
        • FY16 (EPS: 0.161) – From 2.03 to 2.39 (Uncertainty Risk: VERY HIGH to EXTREME)
        • FY17 (EPS: 0.193) – From 2.44 to 2.87 (Uncertainty Risk: HIGH to VERY HIGH)
      • EPS applied to reach the current stock price (2.77): 0.210
    • Simple Yield Valuation
      • FY15–EY%: 8.8%
      • FY15–DY%: 4.7%
      • R4Q–EY%: 7.2%
      • R4Q–DY%: 8.3%
    • I manually calculated average (median) of P/E of this industry: 20, which is 5% EY%. If I apply this to Absolute EY%, this yields range of fair value: 3.22 to 3.8.
    • Looking at various of valuation, I think fair value of KMLOONG range from 2.9 to 3.4.
  • The CPO price moves in a cyclical manner. In a worst case scenario, KMLOONG, a net cash company with a low cost of production and an experienced management team would be able to withstand the turbulence and even take up expansion opportunities.
  • In overall, valuation of KMLOONG is not bad, but less attractive.
  • KMLOONG is not only a good counter for trading, but it maintains high dividend yield too. I am not sure it can maintain high dividend yield if CPO prices continue at low range.
  • Unfavourable outcome of a court case made by some natives against its subsidiary, Tetangga Akrab Pelita (Pantu) Sdn Bhd (currently known as Winsome Pelita (Pantu) Sdn Bhd), regarding their customary rights to land. The group has accounted for impairment of assets and provision of contingent liabilities of RM3mil.
  • The FFB production for the current quarter and year-to-date were 77,300 MT and 304,700 MT respectively which were 10% lower and 6% higher comparing the corresponding periods in last year.
  • The plantation operations did not face problem in selling its FFB production as most of the produce was supplied to mills within the Group. Average FFB price was 6% higher for the current year-to-date as compared to last year.
  • I will closely monitor FCPO prices, and consider to buy KMLOONG when only FCPO turns bullish.

image

Latest Financial – Q1 2016 Financial Report (30 Jun 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4787713

At the time of writing, I did not own shares of KMLOONG.

KMLOONG – Fundamental Analysis (30 Mar 2015)

KMLOONG Analysis:-

Excel – http://1drv.ms/1xrraUo

Notes – http://tinyurl.com/ofregj3

My View:-

  • Valuation:
    • 5-Y DCF:
      • Good Scenario: 4.58 (Fair value uncertainty: LOW)
      • Base Scenario: 4.02 (Fair value uncertainty: LOW)
      • Bad Scenario: 3.52 (Fair value uncertainty: MEDIUM)
      • Ugly Scenario: 3.07 (Fair value uncertainty: HIGH)
      • At current price (2.78), based on RDCF, assumption of FCFF growth rate in the next 5 years is -5.5%.
      • Considering the factors surrounding this sector and this company, I think the assumed FCF growth may not supported by future earnings. I will take the bad/ugly scenario into consideration.
    • Absolute EY%
      • Trailing:
        • FY15 (EPS: 0.243) – Fair value 3.06 (Fair Value Uncertainty: HIGH)
        • R4Q (EPS: 0.243) – Fair value 3.06 (Fair Value Uncertainty: HIGH)
      • Forward:
        • FY16 (EPS: 0.247) – Fair value 3.11 (Fair Value Uncertainty: MEDIUM)
        • FY17 (EPS: 0.268) – Fair value 3.37 (Fair Value Uncertainty: MEDIUM)
      • EPS applied to reach the current stock price (2.78): 0.221
  • The CPO price moves in a cyclical manner. In a worst case scenario, KMLOONG, a net cash company with a low cost of production and an experienced management team would be able to withstand the turbulence and even take up expansion opportunities.
  • In overall, valuation of KMLOONG is not bad, but less attractive. KMLOONG is a good counter for trading.
  • Unfavourable outcome of a court case made by some natives against its subsidiary, Tetangga Akrab Pelita (Pantu) Sdn Bhd (currently known as Winsome Pelita (Pantu) Sdn Bhd), regarding their customary rights to land. The group has accounted for impairment of assets and provision of contingent liabilities of RM3mil.
  • The FFB production for the current quarter and year-to-date were 77,300 MT and 304,700 MT respectively which were 10% lower and 6% higher comparing the corresponding periods in last year.
  • The plantation operations did not face problem in selling its FFB production as most of the produce was supplied to mills within the Group. Average FFB price was 6% higher for the current year-to-date as compared to last year.
  • I will closely monitor FCPO prices, and consider to buy KMLOONG when only FCPO turns bullish.

Latest Financial – Q4 2015 Financial Report (26 Mar 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1914021

At the time of writing, I did not own shares of KMLOONG.

image

KMLOONG – Fundamental Analysis (2 Jan 2015)

KMLOONG Analysis:-

Excel – http://1drv.ms/13Z7Pfo

Notes – http://tinyurl.com/n476z75

My View:-

  • Fair values:
    • 5-Y DCF:
      • Good Scenario: 4.59 (Fair value uncertainty: LOW)
      • Base Scenario: 4.11 (Fair value uncertainty: LOW)
      • Bad Scenario: 3.67 (Fair value uncertainty: MEDIUM)
      • Ugly Scenario: 3.29 (Fair value uncertainty: MEDIUM)
      • If growth of FCFF in the next 5 years is -5.5%, KMLOONG still worth 2.68.
      • Considering the factors surrounding this sector and this company, I think the assumed FCF growth may not supported by future earnings. I will take the bad/ugly scenario into consideration.
    • Absolute EY%
      • Trailing:
        • FY14 (EPS: 0.198) – Fair value 2.49 (Fair Value Uncertainty: HIGH)
        • R4Q (EPS: 0.264) – Fair value 3.32 (Fair Value Uncertainty: MEDIUM)
      • Forward:
        • FY15 (EPS: 0.225) – Fair value 2.83 (Fair Value Uncertainty: HIGH)
        • FY16 (EPS: 0.226) – Fair value 2.84 (Fair Value Uncertainty: HIGH)
      • EPS applied to reach the current stock price (2.68): 0.213
    • Absolute PE
      • FY14 (EPS: 0.198) – Fair value 2.04 (Fair Value Uncertainty: VERY HIGH)
      • R4Q (EPS: 0.264) – Fair value 2.73 (Fair Value Uncertainty: HIGH)
  • The CPO price moves in a cyclical manner. In a worst case scenario, KMLOONG, a net cash company with a low cost of production and an experienced management team would be able to withstand the turbulence and even take up expansion opportunities. Even in the ugly senario, it still worth 3.29.
  • Nevertheless, in overall, valuation of KMLOONG is not so attractive.
  • Unfavourable outcome of a court case made by some natives against its subsidiary, Tetangga Akrab Pelita (Pantu) Sdn Bhd (currently known as Winsome Pelita (Pantu) Sdn Bhd), regarding their customary rights to land. The group has accounted for impairment of assets and provision of contingent liabilities of RM3mil.
  • I will closely monitor FCPO prices, and consider to buy KMLOONG when only FCPO turns bullish.

Latest Financial – Q3 2015 Financial Report (31 Dec 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1840665

At the time of writing, I did not own shares of KMLOONG.

KMLOONG – Fundamental Analysis (1 Oct 2014)

KMLOONG Analysis:-

Excel – http://1drv.ms/1vvzUE6

My View:-

– Fair values:
  – 5-Y DCF:
    – Base Scenario: 4.1 (Fair Value Uncertainty: LOW)
    – Good Scenario: 4.59 (Fair Value Uncertainty: LOW)
    – Bad Scenario: 3.67 (Fair Value Uncertainty: MEDIUM)
    – Ugly Scenario: 3.29 (Fair Value Uncertainty: MEDIUM)
    – Considering the factors surrounding this sector and this company, I think the assumed FCF growth may not supported by future earnings. I will take the bad/ugly scenario into consideration.
  – Absolute EY%
    – Trailing:
      – FY14 (EPS: 0.198) – Fair value 2.41 (Fair Value Uncertainty: VERY HIGH)
      – R4Q (EPS: 0.266) – Fair value 3.24 (Fair Value Uncertainty: MEDIUM)
    – Forward:
      – FY15 (EPS: 0.24) – Fair value 2.92 (Fair Value Uncertainty: HIGH)
      – FY16 (EPS: 0.228) – Fair value 2.78 (Fair Value Uncertainty: HIGH)
    – EPS applied to reach the current stock price (2.81): 0.231
– The CPO price moves in a cyclical manner. In a worst case scenario, KMLOONG, a net cash company with a low cost of production and an experienced management team would be able to withstand the turbulence and even take up expansion opportunities. Even in the ugly senario, it still worth 3.29.
– Nevertheless, In view of lower CPO prices and slower CPO demand towards end-2014, I expect weaker earnings in 2HFY15. FY15/16 EPS by 15%/7% was trimmed after imputing lower CPO price assumptions (CY14/15 at RM2,430/RM2,400 per MT). Also, I do not expect the group to see a sharp growth in FFB output in the near-term because of minimal new matured areas.
– I will closely monitor FCPO prices, and consider to buy KMLOONG when only FCPO turns bullish.

Latest Financial – Q2 2015 Financial Report (29 Sept 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1751245

At the time of writing, I did not own shares of KMLOONG.