El Nino-related yield pressure to temper KLK's near-term outlook
KUALA LUMPUR: Kuala Lumpur Kepong Bhd’s (KLK) near-term outlook is likely to be tempered by potential El Nino-related yield pressure in Indonesia and elevated gearing, said Public Investment Bank Bhd.
Kuala Lumpur Kepong Bhd's (KLK) near-term outlook is anticipated to be impacted by potential yield pressure due to El Nino in Indonesia and significant debt levels, according to an analyst at Public Investment Bank Bhd. Analyst Chong Hoe Leong retains a neutral stance on KLK with the target price unchanged at RM23.86. The third-quarter results were significantly affected by a RM1.6 billion non-cash impairment on its Synthomer plc investment.
However, KLK's core business demonstrated resilience, with the manufacturing division regaining profitability and plantation earnings remaining stable despite lower palm oil prices. The company's outlook will be moderated by El Nino-related yield pressure in Indonesia, ongoing refinery losses, high gearing, and limited contribution from the property segment, according to Chong.
The financial year 2027 is considered a transition period for KLK, with management prioritizing debt reduction and controlled capital expenditure. The company aims to decrease gross gearing to 50% by FY27, with a quieter year focused on debt repayment and disciplined capex.
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