Is Kim Loong Resources Bhd A Great Investment?

In 1967, Sharikat Kim Loong Sendirian Berhad was established and began its oil palm plantation operations on a land measuring 1,000 acres in Ulu Tiram, Johor. After nearly 1½ decade later, the company ventured into Sabah and, as a result, expanded quickly in the 1980s and 1990s.

Subsequently, it set up Kim Loong Resources Bhd (Kim Loong), placed all of its plantation assets under the new entity and has listed in on Bursa Malaysia in 2000. Since then, it had enlarged its existing operations in both Johor and Sabah and also ventured in Sarawak. As I write, Kim Loong is worth RM 1.22 billion in market capitalization.

Here, I’ll list down 9 quick things you need to know about Kim Loong before you invest.

#1: Stock Symbol

Ticker Symbol: KLSE: KMLOONG / KLSE: 5027
Market Capitalization: RM 1.22 Billion (1 June 2018)

Share Price: RM 1.30 (1 June 2018)

Industry: Oil Palm Plantations

Syariah Compliant: Nope

#2: The Business

The following are the key details of Kim Loong’s plantation assets:

  1. Location of Oil Palm Estates
    Kim Loong has a total of 15,946 hectares of oil palm estates. They are located in Keningau, Sabah (7,191 hectares), Sandakan, Sabah (2,731 hectares), Telupid, Sabah (1,996 hectares), Sg. Tenggang / Kranggas, Sarawak (2,895 hectares), and Kota Tinggi, Johor (1,133 hectares).
  2. Age Profile
    As at 31 January 2018, 86% of these plantations are matured with the age above 6 years old. Meanwhile, 9% of these plantations are young where their age ranges between 3 – 6 years old. The remaining 5% of these plantations are immature.  
  3. Palm Oil Mills
    Kim Loong operates three palm oil mills with a combined capacity of 250 MT of Fresh Fruit Bunches (FFB) an hour or 1.5 million MT FFB annually. They are situated in Kota Tinggi, Johor (100 MT per hour), Keningau, Sabah (90 MT per hour) and, Telupid, Sabah (60 MT per hour).

#3: Productions

Kim Loong had achieved stable growth in productions of fresh fruit bunches (FFB), crude palm oil (CPO) and palm kernel (PK) over the last decade. The exception was in financial year 2017 when Kim Loong had reported a drop in palm productions as yields were affected by the El Nino phenomenon in that year. Overall, Kim Loong has increased productions of:

  1. FFB to 340,410 MT in 2018, up from 272,334 MT in 2009.  
  2. CPO to 322,407 MT in 2018, up from 145,441 MT in 2009.  
  3. PK to 73,382 MT in 2018, up from 12,297 MT in 2009.

Source: Annual Reports of Kim Loong Resources Bhd

#4: Profitability

Despite volatility in prices of palm products, Kim Loong had delivered stable financial results to its shareholders. Revenue grown from RM 507.1 million in 2009 to RM 1.08 billion in 2018. Kim Loong averaged in RM 60 – 70 million a year in shareholders’ earnings from 2009 to 2013. Since then, Kim Loong had increased its shareholders’ earnings from RM 53.9 million in 2013 to RM 98.8 million in 2018. Overall, Kim Loong had generated 10-Year Return on Equity (ROE) average of 13.56% per annum. This means, it had made, on average, as much as RM 13.56 in annual earnings from every RM 100.00 in shareholders’ equity from 2009 to 2018.


Source: Annual Reports of Kim Loong Resources Bhd

#5: Balance Sheet Strength

As at 31 January 2018, Kim Loong has reported to have loans and borrowings amounting to RM 27.1 million, 4.4% of its shareholders’ equity. Thus, its debt levels are relatively low and manageable at the moment. Kim Loong reported also to have cash reserves of RM 250.4 million where RM 166.3 million of the cash were placed in time deposits and short-term deposits with banks and as well as financial institutions where they yield 3.50% and 3.40% in interests a year respectively.

#6: Future Prospects

Here are the key highlights of Kim Loong moving ahead:

FFB Production Forecast

Kim Loong produced 340,410 MT of fresh fruit bunches (FFB) in 2018. The board intends to replant 1,200 hectares of old palms which are unable to hit high levels of FFB Yields. As such, Kim Loong had revealed that it expects to produce FFB approximately 90% of what was produced in 2018 for the year 2019.

Biogas Projects

Kim Loong had secured Sustainable Energy Development Authority (SEDA) approval for two biogas plants. They are 1.8 megawatt for Kota Tinggi mill & 2.0 megawatt for Keningau mill. In 2018, Kim Loong has installed the biogas plant in Kota Tinggi and it is expected to commence operations in H2 2018.

Sourcing for New Plantation Assets

The Group has also been sourcing for additional plantation land in Johor, Pahang, Sabah and Sarawak. However, Roundtable on Sustainable Palm Oil (RSPO) restrictions is a major constraint. To support its plantation operation in Sarawak, Kim Loong is actively looking into the possibility of setting up a palm oil mill in Sarawak.

#7: Valuation

Kim Loong had just completed the listing of 935.4 million subdivided shares on 5 April 2018. Hence, it is necessary to make adjustments to the company’s Earnings per share (EPS), net assets a share and ordinary dividends per share (DPS) before doing a proper valuation on Kim Loong.

In 2018, Kim Loong has reported:

  1. Earnings of RM 98.8 million, thus, its EPS works out to be RM 0.106. At current price of RM 1.30, Kim Loong’s current P/E Ratio is 12.32.  
  2. Shareholders’ Equity of RM 620.4 million, thus, its net assets a share works out to be RM 0.663. At current price of RM 1.30, Kim Loong’s current P/B Ratio is 1.97.  
  3. Ordinary Dividend Payouts of RM 56.0 million, hence, its ordinary DPS works out to be RM 0.06. If it is able to maintain its DPS of RM 0.06 in financial year 2019, its dividend yields would be 4.61%.

#8: Investors Relation

For further enquiries or to request for additional investment information on Kim Loong Resources Bhd’s Investors Relation matters, you may contact:
Website: http://www.kimloong.com.my/page/financial/index.asp

#9: Major Shareholders

As at 23 April 2018, Kim Loong Resources Bhd’s main shareholders and their shareholdings are as followed:

– Sharikat Kim Loong Sendirian Berhad: 63.27%

– Teo Chuan Keng Sdn Bhd: 2.11%

– Morisem Consolidated Sdn Bhd: 1.96%

– Krishnan Chellam: 1.72%

– PB Smallcap Growth Fund: 0.86%

Notes:

Gooi Seong Lim, Gooi Seong Heen, Gooi Seong Chneh, and Gooi Seong Gum are substantial shareholders of Kim Loong Resources Bhd as they have interests in Sharikat Kim Loong Sendirian Bhd. Their roles in Kim Loong are stated as followed:

– Gooi Seong Lim: Executive Chairman

– Gooi Seong Heen: Managing Director

– Gooi Seong Chneh: Executive Director

– Gooi Seong Gum: Executive Director

If you are just getting started in learning about investing in the Asian Stock Market, we have created a full 15-Video Course for you to help you get up to speed on how to look for great investments in Asia. Click here to find out more.

Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

Leave a Reply

Your email address will not be published. Required fields are marked *

Share This