Macquarie raises target price on KL Kepong stock

MACQUARIE Research has raised its target price on shares of Kuala Lumpur Kepong Bhd (KLK) as the strong palm oil price is set to fuel better earnings for the planter.The stock could reach RM21.30 by the end of 2008, it said in a report dated January 9. KLK shares closed 30 sen lower to RM18 yesterday."KLK's earnings are also sensitive to CPO (crude palm oil) price movements: every US$25/tonne (RM81.50/tonne) rise in the CPO price could increase the company's 2008 earnings by four per cent," Macquarie said.KLK made a net profit of RM694.2 million for the year to September 30 2007.Net profit could jump 57 per cent to RM1.1 billion in 2008 as the CPO price strengthens further. This is due to rise another 19 per cent to RM1.3 billion in 2009.Macquarie has raised its average CPO price assumption by 13 per cent to US$880 (RM2,869) per tonne for 2008. It predicts CPO price to increase further to US$950 (RM3,097) per tonne in 2009 and 2010.Macquarie has an outperform call on KLK's stock, and it is one of its top 10 picks in Malaysia."The company is in a low net gearing position, and there is potential for its ROE (return on equity) to increase if it uses more aggressive capital-management strategies," it said.-www.btimes.com.my