KUALA LUMPUR: Analaysts are maintaining their earnings forecasts on Kuala Lumpur Kepong Bhd
(KLK) pending an outcome on its offer to purchase IJM Corp Bhd‘s entire stake in IJM Plantation Bhd for RM1.58bil, although there could be long-term upsides from the deal.
“We are short term neutral on KLK’s offer to privatise IJMP as earnings accretion is likely to be negligible in the short term.
“However, given scarcity of land for future expansion, this acquisition is long term positive,” said Maybank Investment Bank Research, which has a “buy” call on KLK.
The research house reiterated its earnings forecasts and target price of RM29.60, based on 31x FY22 price-earnings ratio, representing its five-year mean.
Kenanga Research said the offer price of RM3.20 a share, which includes 10 sen dividend per share, is a fair price as it translates into an EV/planted ha of about RM54,000, in line with market price.
It added that synergies can be found in its operations in Sabah, East Kalimantan and Sumatra.
“Reiterate OUTPERFORM with an unchanged TP of RM25.10 based on CY21E PER of 23x (in-line with large cap peers’ average), reflecting -1.0SD valuation,” said Kenanga.
MIDF Research is also leaving its earnings estimates unchanged pending an outcome on the deal.
It believes that the proposed consideration is fair price, and that despite a higher gearing ratio from the purchase KLK continues to perform well in terms of financial stability.
“We are maintaining our target price of RM27.01. This is premised on pegging FY22EPS of 101.2sen against forward PER of 26.7x.
“Our target PER is at one standard deviation above KLK’s two-year historical average,” it said.
