KUALA LUMPUR (Dec 30): Shares of Kim Loong Resources Bhd (KL:KMLOONG) may have small upside in the next 12 months, analysts said, even as they raised earnings forecasts for the palm oil producer following a better-than-expected quarter.

Core net profit for its first nine months accounted for 88% of the full-year consensus expectations, thanks to higher crude palm oil (CPO) prices. Investors treaded carefully on Monday following the earnings announcement while the majority of research houses were wary of the outlook.

"We expect a more cautious outlook for CPO prices, influenced by softer exports and demand from major importing countries, along with an anticipated increase in global vegetable oil supply," TA Securities said.

The research house maintained its "hold" call on the stock, citing a healthy balance sheet and net cash position supporting a stable dividend yield of 5%-6% per year.

Shares of Kim Loong have risen more than 26% year-to-date tracking gains of peers amid elevated CPO prices. Bursa Malaysia Plantation Index, which tracks 43 stocks in the sector, has gained nearly 9% this year.

The benchmark third-month CPO futures meanwhile have climbed about 25% since the start of the year to RM4,641 on Monday amid concerns over tightening supply and poor weather conditions.

Only one out of four research houses rated the stock as a "buy" while the remaining recommended "hold" on Kim Loong. The stock's average 12-month target price is RM2.64, according to Bloomberg, suggesting a potential upside of 6.88% from the current price.

Apex Securities, the sole house on "buy" call, said the stock should be valued at RM2.80, about 15 times the forward earnings and above the valuations in the past three years given the upcycle in palm oil price.

The house expects the selling prices of CPO to average RM4,300 per tonne for 2025.

The consensus is now calling for net income of RM169 million for the financial year ending Jan 31, 2025 (FY2025) and RM177.5 million for FY2026.

On Monday, Kim Loong shares were up one sen at RM2.47 at the noon break, valuing the company at RM2.42 billion. The counter is trading at a trailing 12-month price-to-earnings ratio of 14.8 times, according to ASKEdge.

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