KUALA LUMPUR: Maybank Investment Bank (IB) Research expects Kuala Lumpur Kepong Bhd (KLK) to post stronger Q4 results, boosted by anticipated net inventory drawdown, and decent downstream earnings.

The research house said on Friday that while the group’s Q3 results had disappointed largely on weak plantation earnings, it believed there was a net inventory build-up which could boost profits in the final quarter. 

However, it conservatively lowered its earnings forecasts by 5%-6% and trimmed its target price to RM23.70 from RM25.00.

“Given limited downside, KLK remains a HOLD,” the research house said.

Plantation earnings before interest and tax (EBIT) for the quarter fell 42% year-on-year to RM136mil, underpinned by lower plantation revenue and higher-than-expected cost of production. 

The lower revenue was achieved despite relatively flattish FFB output and only 14% lower CPO average selling prices achieved.

“This leads us to believe there was a net build-up in inventory in Q3 that could boost sales in the Q4,” it said.

As for manufacturing, it noted that the division chalked up decent margins of 4% to bring in RM99mil in EBIT, a turnaround from a RM5mil loss a year ago. 

Its oleo division benefited from the low raw material cost. 

As for property, it delivered a decent EBIT of RM8mil on higher progress billing.