Kuala Lumpur Kepong (KLK) has received a renewed target price from RHB Investment Bank Bhd (RHB Research), with the firm maintaining a BUY rating and raising the target price to RM27.20 from RM25.40.
This revision, representing a potential 24% upside, is driven by rising crude palm oil (CPO) prices, which have recently crossed the RM5,000 per tonne mark.
The research house noted that while KLK is not as sensitive to CPO price shifts as pure plantation firms, the current valuation remains appealing, trading at 19 times forward price-to-earnings, in the lower range of its industry peers at between 18 times and 22 times.
RHB Research's analysis attributes the CPO price surge to several factors, including an 18% increase in crude oil prices over the past two months due to geopolitical tensions, delays in South American soybean planting, Thailand's temporary palm oil export ban and heightened speculative activity tied to the US election.
In previous election cycles, particularly after Donald Trump's 2016 victory, prices for soybean and palm oil saw significant increases. KLK's comparatively stable valuation, combined with an estimated 2% yield forecast for FY25, adds to its attractive positioning within the market.
Looking ahead, RHB anticipates that global vegetable oil prices will remain elevated, particularly as geopolitical risks and tightening supply conditions persist. While 2024's market may remain volatile, 2025 is expected to show stronger fundamentals with biodiesel demand increases and further tightening supplies in crops such as sunflower and rapeseed.
