Fundamental Analysis of Kim Loong Resources Berhad by L. C. Chong https://lcchong.wordpress.com/ https://www.facebook.com/groups/285121298359919/

1. KMLOONG
FUNDAMENTAL ANALYSIS
Financial Year 2015 (31 Jan 2015)
L. C. Chong
27 January 2016 (http://lcchong.wordpress.com and https://goo.gl/jjkq4P)

2. DISCLAIMER
I am NOT an investment advisor nor a financial advisor, and no information provided
here is to be interpreted as a suggestion to buy or sell securities.
You and I may have different opinion, but I respect your opinion.
All figures in MYR and in '000s, except per share data
2

3. DECLARATION OF INTEREST
• At the time of writing, I owned shares of KMLOONG.

4. SCOPE
• Figures and ratios are based on the figures reported in Annual Report or the latest
Q4 Quarterly Report (QR)
• Unless there is a need, this analysis will not include financial figures reported in Q1,
Q2 and Q3
• I will provide QR result highlights in my blog
• Valuation is not covered in this analysis
• I will provide valuation in my blog.

5. CHANGES
• 26 Jan 2016 – First write up of KMLOONG in PowerPoint format

6. OTHER REFERENCES
• Investment Analysis on Crude Palm Oil Industry – Handout and Data sheets
• To be fair to the people who paid for my workshop, I will just show the high level
comparison between KMLOONG and its peers.

7. BUSINESS PROFILE

8. BUSINESS PROFILE
• The Group’s operations are divided into two main business segments:
• Plantation - cultivation of oil palm
• Milling - processing and marketing of oil palm products

9. OWNERSHIP SUMMARY
CORPORATIONS (PRIVATE)
69%
PUBLIC AND OTHER
20%
INDIVIDUALS/INSIDERS
6%
INSTITUTIONS
2.51%
CORPORATIONS (PUBLIC)
2%

10. TOP 5 SHAREHOLDERS
SHARIKAT KIM LOONG
SENDIRIAN BERHAD
91%
TEO CHUAN KENG SDN. BHD.
3%
IOI CORP.BHD
3%
KRISHNAN CHELLAM
2%
KOPERASI POLIS DIRAJA
MALAYSIA BERHAD, ASSET
MANAGEMENT ARM
1%

11. OWNERSHIP ANALYSIS
• The shareholder with the largest stake in KMLOONG is SHARIKAT KIM LOONG
SENDIRIAN BERHAD, with a 63% stake
• Institutional funds only owned 2.5% of KMLOONG.

12. ECONOMIC MOATS

13. ECONOMIC MOATS
• Cost Advantage (Wide)
• Despite fluctuation of CPO prices, KMLOONG managed to maintain gross margin above
19%, and EBITDA margin above 18% since 2009
• Switching Cost (No)
• Too many players in the market
• Network Effect (Not applicable)
• Efficient Scale (Not applicable)

14. ECONOMIC MOATS (CONT.)
• Intangible Asset (Wide)
• Use of high yield germinated seeds, and stringent culling process to select the best yield seedling
• Manual and timely fertiliser application
• Conducts "sense test" every four months to estimate the FFB production of the following quarter
• Hires an experienced manager in each estate size of 5,000 acres to monitor the estate
Successful Agronomic
Management
• Each of KMLOONG's mills is strategically located near to/in the KMLOONG plantation estate and the supply of FFB
• The ample supply of FFB could increase the processing margin while the close proximity to FFB suppliers minimise the transportation time and cost
Strategic Location
• KMLOONG designed or modified internally many of the highly efficient equipment or machineries. They are able to save on PPE cost and thus achieve greater processing margin
while enjoying the exclusivity of their technology
• Developed the world's first palm-pressed fibre oil extraction (PFOE) plant with Eonchem Technology in 2005
Continuous
Innovations
• KMLOONG mills fully process all the by-products of oil palms and even to the extent of making profit out of them besides being environmental friendly
• Uses the solvent extraction technology to extract residual palm oil from palm-pressed fibres to increase the OER by approximately 0.5%
Total Waste
Management

15. ECONOMIC MOATS (CONT.)
14.8%
26.2%
14.1% 14.1%
17.1%
14.5%
26.6%
12.6%
16.9%
21.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2011-01-31 2012-01-31 2013-01-31 2014-01-31 2015-01-31
ROIC & CROIC
ROIC % CROIC %
In the past 5 years, KMLOONG managed to maintain more than 10% of ROIC and CROIC. By
MorningStar’s definition, KMLOONG has a wide economic moat.

16. ECONOMIC MOATS (CONT.)
• Ranking of KMLOONG, in terms of ROIC and CROIC
• If compare to 41 peers in CPO industry – TOP 5 in the past five years
• If compare to peers that produce 300K-700K mt – No. 1 in the past five years.

17. PERFORMANCE PROFILE
Production and Operation Efficiency

18. PLANTABLE AREA
2011 2012 2013 2014 2015
Mature (ha) 13,074 12,740 12,827 13,012 13,581
Immature (ha) 794 1,203 1,523 1,874 1,320
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
12,200
12,400
12,600
12,800
13,000
13,200
13,400
13,600
13,800
Immature(ha)
Mature(ha)

19. PLANTABLE AREA (CONT.)
• The immature area started to become mature in FY15
• Production of FFB is expected to increase approx. 2% from 304,732 mt (FY15) to
309,680 mt (FY16).

20. PLANTABLE AREA (CONT.)
628
596
732
468 461
0
100
200
300
400
500
600
700
800
2011 2012 2013 2014 2015
ha
Reserves
The main challenge of KMLOONG in the next few years is to increase its
reserve lands.

21. FFB PRODUCTION AND YIELD
17.39
24.57
21.86 22.07 22.44
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2011 2012 2013 2014 2015
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Yield
MT
FFB Production (mt) FFB Yield

22. FFB PRODUCTION AND YIELD
(CONT.)
2011 2012 2013 2014 2015
KMLOONG 17.39 24.57 21.86 22.07 22.44
Industry Avg. 19.44 19.78 19.59 20.10 20.86
0.00
5.00
10.00
15.00
20.00
25.00
30.00
FFB Yield – Comparison with Industry Avg.
FFB yield of KMLOONG is above industry average

23. FFB PRODUCTION AND YIELD
(CONT.)
0.00 5.00 10.00 15.00 20.00 25.00
Latest FFB Yield by Company
KMLOONG

24. CPO EXTRACTION AND EFFICIENCY
21.37%
21.81%
22.09%
22.19%
22.39%
20.80%
21.00%
21.20%
21.40%
21.60%
21.80%
22.00%
22.20%
22.40%
22.60%
0
50,000
100,000
150,000
200,000
250,000
300,000
2011 2012 2013 2014 2015
MT
CPO Extraction (mt) Oil Extraction Rate (%)

25. CPO EXTRACTION AND EFFICIENCY
(CONT.)
21.37%
21.81%
22.09% 22.19%
22.39%
20.68% 20.69% 20.59%
20.88%
21.51%
19.50%
20.00%
20.50%
21.00%
21.50%
22.00%
22.50%
23.00%
2011 2012 2013 2014 2015
Oil Extraction Rate – Comparison with Industry Avg.
KMLOONG Industry Average
• OER of KMLOONG is way above industry average
• Top 3 in the industry.

26. CPO EXTRACTION AND EFFICIENCY
(CONT.)
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%
Latest OER% by Company
KMLOONG

27. FINANCIAL PERFORMANCE

28. PROFITABILITY
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Revenue

29. PROFITABILITY (CONT.)
20.7%
17.9%
16.5%
21.7%
15.0% 15.1% 15.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0
50,000
100,000
150,000
200,000
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
EBIT and EBIT Margin
EBIT EBIT Margin %

30. PROFITABILITY (CONT.)
0
50,000
100,000
150,000
200,000
250,000
300,000
0.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
MYR’000
USD/MT
CPO Prices vs. Profitability
EBITDA Revenue CPO Prices (USD/MT)

31. PROFITABILITY (CONT.)
• Despite bearish CPO prices in the past 5 years, KMLOONG still managed to maintain
its revenue in the range of 150,000 and 195,000
• Its operational excellence protects itself from poor CPO prices
• Even if Its EBIT margin decreased from 20.7% (FY09) to 15% (FY13), but KMLOONG
still managed to maintain EBIT margin at 15% for three years
• The latest EBIT margin of KMLOONG (15.5%) can be rated as Baa.

32. LEVERAGE & COVERAGE
0.38 x
0.58 x
0.41 x
0.21 x
0.32 x
0.42 x
0.37 x
0.00 x
0.10 x
0.20 x
0.30 x
0.40 x
0.50 x
0.60 x
0.70 x
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Debt / EBITDA
Debt/EBITDA can be rated as Aa.

33. LEVERAGE & COVERAGE (CONT.)
182.13 x
73.41 x
51.00 x
101.12 x 99.64 x
106.33 x
114.67 x
0.00 x
50.00 x
100.00 x
150.00 x
200.00 x
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
EBITDA/Interest
EBITDA/Interest can be rated as Aa.

34. LEVERAGE & COVERAGE (CONT.)
9.0%
10.3%
8.0%
5.9% 5.6%
7.0% 7.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Debt / Book Capitalization
Debt/Book Capitalization can be rated as Aa.

35. LIQUIDITY
0
5
10
15
20
25
30
35
0
5
10
15
20
25
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Days In Inventory 19 30 25 23 31 28 18
Days In Receivables 14 15 11 10 15 13 8
Days Payable Outstanding 15 23 23 22 30 28 24
Cash Conversion Cycle 18 22 13 11 15 12 2

36. GROWTH DRIVERS

37. GROWTH DRIVERS
• 11 Jul 2015 - Its wholly owned subsidiary, Winsome Plantations S/B has entered into
a supplemental agreement to the joint venture agreement with Pelita Holdings S/B
to develop approximately 367 hectares of new state land in addition to the
approximately 1,700 hectares of existing state land at Sri Aman Division, Sarawak,
into oil palm plantation together with facilities and the provision of services ancillary
• 30 Jun 2014 - Expansion in Sarawak - Looking into acquiring 12,410ha of land in
Sarawak as the plantation group aims to expand its oil palm business in the state.

38. GROWTH DRIVERS (CONT.)
0
5
10
15
20
25
30
35
40
45
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Development of the world biodiesel market
World biodiesel production World biodiesel trade
Source: OECD-FAO Agricultural Outlook 2015

39. GROWTH DRIVERS (CONT.)
Source: National Centers for
Environmental Information
• El Nino event ranks among three
strongest since 1950
• LMC's Fry says full-blown El Nino could
push prices to $800
• Prediction: A 9% drop in Indonesian
production and 4.5% slide in Malaysian
output on a full-blown El Nino
• Both Indonesia and Malaysia also have
high inventories to cushion the impact
of a shortage
Source: Bloomberg 27 Nov 2015

40. ISSUES/RISKS/CHALLENGES

41. ISSUES/RISKS/CHALLENGES
• FY15 Q3 - Unfavourable outcome of a court case made by some natives against its
subsidiary, Tetangga Akrab Pelita (Pantu) Sdn Bhd (currently known as Winsome
Pelita (Pantu) Sdn Bhd), regarding their customary rights to land.
• The group has accounted for impairment of assets and provision of contingent liabilities
of RM3mil
• Labor shortages
• CPO price yet to turn to bullish. The CPO price moves in a cyclical manner. In a worst
case scenario, KMLOONG, a net cash company with a low cost of production and an
experienced management team would be able to withstand the turbulence and
even take up expansion opportunities.

42. ISSUES/RISKS/CHALLENGES
Resistance zone: 2520 - 2660
• CPO already shown sign of bullish reversal
• Now, it is time for it to form an uptrend
• The key is whether it can break the next resistance
zone as below.

43. GOING FORWARD

44. SHAREHOLDER RETURN
Time
Frame
Date Bought at Original
Value
Dividend
Received
Unrealized
Gain/Loss
Current
Return
CAGR %
3-Y 23 Jan 2013 2.24 2,240 500 840 3,580 17%
5-Y 26 Jan 2011 2.41 2,410 780 670 3,860 10%
10-Y 26 Jan 2006 0.814 814 2,034 3,498 6,346 23%
Assumptions:
1. Commission paid is ignored in this simulation
2. The current price is 3.08 (as of 26 Jan 2016)
3. Unit purchased is 1,000.

45. GOING FORWARD
• I believe that
• CPO price will remain stable in 2016
• FFB and CPO production of KMLOONG will increase marginally in 2016
• I just accumulated KMLOONG recently.