Kulim's profit from continuing ops jumps 171% to RM66.71m

Published: Monday May 26, 2014 MYT 6:38:00 PM
Updated: Monday May 26, 2014 MYT 6:43:44 PM

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KUALA LUMPUR: Plantations-based Kulim (Malaysia) Bhd's profit from continuing operations surged 171% to RM66.71mil from RM24.60mil a year ago due to higher production and prices for crude palm oil (CPO).
It said on Monday, its profit before tax increased by 178% to RM90.62mil compared RM32.62mil a year ago. Kulim's revenue rose 16% to RM829.67mil from RM714.82mil.
However, its earnings were RM38.13mil compared with RM345.15mil a year ago when there was profit from discontinued operations net of tax of RM339.3mil. Earnings per share were 2.98 sen.
On its Malaysian plantations operations, it said the group's fresh fruit bunches (FFB) production for Q1, 2014 rose 11.5% to 177,399 tonnes from 159,059 tonnes a year ago.

"The group's cumulative CPO production for the first quarter 2014 was at 59,964 tonnes. This was 16.33% higher compared to the CPO production for the corresponding period in 2013 of 51,545 tonnes," it said.
Kulim said the total FFB processed by the group's mills in Q1 2014 rose 13.6% to 287,569 tonnes from 253,091 tonnes. Total FFB processed included crops purchased from outside the group.
"The group's oil extraction rate for the first quarter 2014 was marginally higher at 20.85% compared to 20.37% for the corresponding period 2013," it said.
Kulim said its Malaysian plantation operation achieved average crude palm oil (CPO) price of RM2,585 and palm kernel at RM1,756 per tonne in Q1 2014 versus RM2,475 and RM1,184 per tonne for CPO and PK respectively a year ago.
Its plantation operations in Papua New Guinea and Solomon Island under the NBPOL Group produced 455,988 tonnes of FFB in Q1, 2014,  up 12.5% on-year.
Together with crops purchased from outside the group, NBPOL Group processed 618,880 tonnes of FFB in Q1, 2014, up 10.3% from a year ago.
NBPOL Group's cumulative CPO production for Q1, 2014 rose 12.5% to 137,031 tonnes from 121,758 tonnes a year ago.
"NBPOL Group's oil extraction rate for Q1, 2014 was at 22.14% compared to the corresponding period in 2013 of 21.7%," it said.

Kulim

Kulim (Malaysia) Berhad (KULIM) - Financial and Strategic SWOT Analysis Review

Summary

Kulim (Malaysia) Berhad (Kulim) involves in three core business, namely, oil palm plantation, foods and restaurants, and intrapreneur ventures. Kulim carries out the production and processing of palm oil in Malaysia, Papua New Guinea and the Solomon Islands. Kulim through its subsidiary QSR Brands Bhd operates 280 Pizza Hut restaurants in Malaysia and Singapore, 640 KFC restaurants in Malaysia, Singapore, Brunei, Cambodia and India and operates 27 RasaMas restaurants in Malaysia and Brunei. Through the intrapreneur ventures segment, the company is into shipping business, insurance brokerage business, fertilizer, and business process outsourcing businesses, among others. Kulim is headquartered in Johor, Malaysia.

The group’s strategy has been to increase its oil yield by enhancing crop quality and the milling process through organic growth, leading to an increase in oil extraction rate. Kulim plans to expand New Britain Palm Oil Ltd’s operations that can enhance future growth opportunities.

http://www.researchandmarkets.com/reports/2081696/kulim_malaysia_berhad_kulim_financial_and

KULIM

Kulim Malaysia Bhd (KUL) Details

Kulim (Malaysia) Berhad primarily is engaged in the oil palm plantation business worldwide. The company produces oil palm products, including palm oil, palm kernel oil, palm kernel cake, oleochemicals, biodiesel, and finished products. Its plantation area consists of 184,096 hectares in Malaysia, Papua New Guinea, and the Solomon Islands. The company is also involved in logistics business; and support operations for plantations, such as agricultural machinery, oil palm nursery and mills maintenance, facilities management and civil works, IT services, and IT system development. In addition, it plants sugar cane and pineapples; provides training facilities for seminars, courses, and accommodation; trades in and distributes various fruits, including Cavendish bananas, fresh and canned pineapples, oranges, dates, and others; and produces oil palm seeds. Further, it is engaged in fish farming business; production of dramas, telemovies, and films; marketing of personal care products under the brand label of Secret Garden; timber downstream processing activities; property business; insurance brokerage business; and shipping business owning 21 vessels comprising 7 oil tankers, 5 harbor tug boats, 5 mooring boats, 2 fast crew boats, and 2 utility tug boats, as well as 2 harbor tug boats. Additionally, it offers data and document processing, asset and fund management, and event management services, as well as provides rubber-based products. Kulim (Malaysia) Berhad was founded in 1933 and is based in Johor Bahru, Malaysia. Kulim (Malaysia) Berhad is a subsidiary of Johor Corporation.

Kulim to be pure plantation player

BY TEE LIN SAY

  

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WHAT does the partial offer for shares of London-listed New Britain Palm Oil Ltd (NBPOL) mean for the offerer, namely Kulim (M) Bhd?

Kulim has said that the NBPOL deal, coupled with Kulim’s divestment last year of its stake in QSR Brands Bhd, will make Kulim a pure plantation player.

Once the exercise is completed, Kulim would have raised its stake in NBPOL by 20% to 68.97%, thereby allowing Kulim to fully consolidate the earnings of NBPOL.

Kulim used to own 80% of NBPOL. Kulim first became a shareholder of the company in 1996 with an 80% equity interest when the Papua New Guinea (PNG) government privatised its investment in NBPOL.

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Kulim had to gradually sell down its stake in NBPOL to fulfil its commitment to the PNG government.

Then in 2007, it announced that it was selling a 10% NBPOL stake to Singapore’s Pacific Rim Plantation Services Pte Ltd at 96 million kina (RM107.67mil) cash.

So currently, NBPOL is a 48.97% associate company of Kulim, and is involved in cultivating and processing palm oil. While NBPOL has some 78,000ha compared to Kulim’s 91,000ha plantation in Malaysia, it is NBPOL which is delivering some 70% of Kulim’s earnings.

NBPOL had historically contributed significantly to the group’s plantation. In 2012, 71.2% of the total crude palm oil production was contributed by the operations in PNG and Solomons Island, which operate under NBPOL Group.

Yields and oil extraction rates in NBPOL are also substantially higher than the Malaysian plantation operations.

The combined hectarage of Kulim and NBPOL is 147,772ha, making it the sixth biggest among Bursa Malaysia-listed plantation companies

On Thursday, Kulim announced it was partially acquiring up to 30 million shares in NBPOL at £5.50 (RM27.24) per offer share with a total consideration of £165.05mil (RM812.3mil) to be satisfied fully in cash.

This represents a price-to-book ratio of about 1.31 times, taking into account NBPOL’s net assets of some £4.18 per share.

NBPOL’s share price reacted to this news by appreciating 11.41% to £5.12 (RM25.34) over the week. Meanwhile, Kulim’s share price barely budged and stood at the RM3.46 level.

Analysts say this is partially because the move has already been anticipated, and Kulim is also assuming debt to take up the stake.

An MIDF analyst says the proposed acquisition is expected to be funded by a combination of cash and bank borrowings. The likelihood is that more than 70% of the purchase consideration will be funded by bank borrowings as the cash position of the group as at end-2012 was only RM222mil.

This will increase the current net gearing ratio of Kulim from 0.17 to 0.46 times, which is higher than the net gearing ratios of Genting Plantations and KL Kepong,” says the MIDF analyst.

According to NBPOL’s website, it has over 78,000ha of oil palm plantations, a further 10,000ha under preparation for oil palm, over 7,700ha of sugar cane and a further 9,200ha of grazing pasture, 12 oil mills, two refineries – one in PNG and one in Liverpool, UK – as well as a seed production and plant breeding facility.

Earnings jump

As the proposed acquisition is expected to be completed in the second half of 2013, Kulim’s earnings should be jolted this year onwards. Consensus earnings estimate onBloomberg for NBPOL is US$53.55mil (RM166mil) and US$96.85mil (RM300.23mil) for its financial years ended Dec 31, 2013 and 2014 respectively.

Based on these assumptions, an MIDF Research analyst expects Kulim’s earnings per share in 2013 and 2014 to increase by 14.4% and 14% respectively.

Alvin Tai, a plantation analyst in RHB Research is positive on the move, and he sees Kulim’s 2014 earnings potentially being boosted by 8%.

Tai believes it is an opportune time for Kulim to raise its stake in NBPOL as management has indicated several years ago that it will raise its NBPOL stake at the right price.

“However, NBPOL’s stock price had stayed persistently high over the past few years, making it expensive for Kulim to raise its stake in the company. Since last year, NBPOL’s stock price has suffered as its earnings plunged due to unusually heavy rainfall. As the weather effect is temporary, this creates an opportunity for Kulim to buy cheaply,” said Tai.

MIDF maintains its “neutral” call on the stock due to several negative factors, for example subdued CPO price and lower oil extraction rate in the Malaysian operations.

“We expect earnings performance for the current financial year to be muted.”

Since the divestment of its restaurant business in early 2013, Kulim has made known its intentions to make plantation its core business.

For the first quarter to March 31, 2013, Kulim’s net profit jumped 402.92% to RM345.53mil on the back of a 23.92% increase in revenue to RM258.86mil. Some RM339.15mil of profits were derived from its discontinued operations which were due to Kulim disposing of its stakes in QSR Brands Bhd and KFC Holdings (M) Bhd.

Last year, a consortium comprising Johor Corp (JCorp), the Employees Provident Fund and CVC Capital Partners took QSR Brands and KFC Holdings private for RM5bil. Prior to the sale, Kulim had a 58.63% interest in QSR, which in turn owned 51% of KFCH. JCorp has a 55.1% stake in Kulim. This exercise was completed in January 2013.