KLK, payouts to surge
Current, target price RM23.1, 27.0 (+16%)
Last, next 12-months cashflow +RM 888, 1,532 million
March 22nd, 2021
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- Sales increased another 7% in the fourth quarter to RM 4.3 billion.
- This is after sales increased by 8% in the third quarter & brings the average quarterly growth to 2%.
- We predict there will be average quarterly growth of 5% in this next 12 months & sales will recover to RM 5.16 billion by the fourth quarter of 2021.
- Cashflow was slightly higher at RM 252 million in the fourth quarter after RM 245 million in the third quarter.
- The quarterly average cashflow is now RM 222 million.
- We assume the low investment spending continues at RM 172 million which with higher sales gives a higher average quarterly free Cashflow of RM 383 million in this next 12 months.
Sales recovering, strong cashflow on lower investment spending, payouts to surge, shares to rise...
- The net leverage of cash minus total liabilities was flat -RM 6.2 billion in the fourth quarter from -RM 6.19 billion in the third quarter but better than -RM 7.8 billion a year ago.
- With our forecast higher free cashflow & assuming a dividend payout of RM 538 million...
- ...net cash will be -RM 5.2 billion in 12 months time.
- Net profit jumped to RM 408 million in the fourth quarter after RM 239 billion in the third quarter on low non-cash costs.
- The cash cost ratio of net profit add non-cash costs minus sales as a percent of sales was lower at 88%.
- We use the same 88% to predict a higher next 12 months profit RM 1.8 billion.
- KLK has paid out RM 900 million of capital the last five years.
- At the current market value of RM 24.6 billion, it’s 27X capital paid, 1.3X sales, 1.1X assets, 1.9X equity with a 13.6% profitability & a 2.2% yield.
- Our cashflow forecast is RM 1.53 billion. At 1.6% with a 0.5X adjustment, gives a higher target price of RM27.