KMLOONG – Fundamental Analysis (27 Jan 2016)

2016-01-27 Uncategorized

Fundamental Analysis as of FY15 – http://www.slideshare.net/lcchong76/kmloong-fundamental-analysis-fy15

Excel – http://1drv.ms/1Vqdr7b

Latest Financial – Q3 2016 Financial Report (30 Dec 2015)

FY16 Q3 Results Highlight:

• The revenue increased by 16.6% for Q3FY16 (RM209m) if compare to Q3FY15 (RM179m). KMLOONG increased operating income by 68% (Q3FY16: RM36m; Q3FY15: RM21m).
• The revenue dropped by -1.4% for 9MFY16 (RM585m) as compared to 9MFY15 (RM594m).
• The better performance was partly due to impairment of assets and provision for contingent liabilities for RM3 million had been recognized in last year, and higher FFB production.
• The FFB production for Q3FY16 was 88,600 MT which was 14% higher than Q3FY15. For 9MFY16, the FFB production was 235,000 MT which was 3% higher than 227,400 MT achieved in 9MFY15.
• Total CPO production for 3QFY16 and 9MFY16 were 89,100 MT and 231,200 MT respectively which were 25% and 16% higher than the production in the corresponding periods last year.
• The market condition and demand for KMLOONG’s milling products has been good and steady for the Q3FY16 and 9MFY16. The sale of CPO, for Q3FY16 and 9MFY16, were 85,600 MT and 226,900 MT respectively, which were 21% and 11% higher comparing to the respective corresponding periods last year. The average prices of CPO for Q3FY16 and 9MFY16 were in the region of RM2,050 per MT and RM2,150 per MT respectively which were about 3% and 10% lower comparing to the respective corresponding periods last year.

Valuation:

• In my opinion, in near term, the fair value of KMLOONG range from 3.1 to 3.5; in long term, the fair value range from 4.5 to 4.7.

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
  • FFB and CPO production of KMLOONG will increase marginally in 2016
• I just accumulated KMLOONG recently.

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