KUALA LUMPUR : PUBLICINVEST Research is keeping its "neutral" recommendation on Kuala Lumpur Kepong Bhd (KLK) with an unchanged target price of RM26.26 per share. The research house said that in a recent meeting with KLK's investor relations representatives, the company's management had guided that it could perform better than last year on the back of improved palm oil product prices and eight to 10 per cent growth in fresh fruit bunch (FFB) production as well as steady production costs. It said KLK has projected eight to 10 per cent FFB production growth this year, following 11 per cent year-on-year growth in financial year 2013. This will be translated into FFB production of 3.89 million tonnes (mt) to 3.97 mt for this year. "This is higher than our earlier estimates of six per cent FFB production growth. It also guided that the cost of production would be slightly lower than last year's RM1,300 per mt, premised on higher production yields and lower fertiliser cost this year," it said in a note yesterday. KLK has allocated a similar capex of about RM900 million for this year. About RM450 million would be earmarked for oleochemical facilities and the remainder would go to new plantings of 5,000ha to 8,000ha in Indonesia , which incidentally only has about 15,000ha to 18,000ha plantable landbank left that is expected to be fully planted in the next three years. The group has total planted landbank of 193,235ha in Malaysia and Indonesia , while unplanted landbank stands at 15,000ha to 18,000ha. A total of 160,163ha, or 83 per cent of total planted landbank, were mature as at 30 September 2013 . It has also ventured into Papua New Guinea and Liberia in the last two years, acquiring total landbank of 69,889ha. The average age profile of KLK's planted area is about 11 years old with 88,592ha, or 46 per cent of total planted area, planted with immature and young oil palm trees. The group still owns about 1,556ha of freehold agricultural land in Sungai Buloh, Selangor , which is believed to be able to generate a gross development value of between RM16 billion and RM20 billion . "With the upcoming major developments by the EPF, coupled with the affordable pricing for its township development in Bandar Seri Coafields, we think the property arm will not be significantly affected by the cooling measures imposed on the property sector lately," the research house said.
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