Shariah Compliant

9 July 2025

Kuala Lumpur Kepong (KLK MK)

Fairly Valued Now; D/G To NEUTRAL

Malaysia Company Update

Agriculture | Plantation

Neutral (from Buy)

Analysts

Hoe Lee Leng

+603 2302 8110

hoe.lee.leng@rhbgroup.com

Iftaar Hakim Rusli

+603-23028114

iftaar.hakim.rusli@rhbgroup.com

Share Performance (%)

52-wk Price low/high (MYR) 18.7-22.6

• Downgrade to NEUTRAL from Buy, with new MYR20.65 from MYR24.45 TP, 1% downside. We expect 2026 to be a more balanced year fundamentally, with lower YoY CPO prices, but geopolitical risks will translate to more volatility. We lower our CPO, but raise PK price assumptions for FY25-27. Valuation for Kuala Lumpur Kepong is now fair at 21x FY26F (Sep), at the high end of its peer range of 17-22x.
• Spot CPO prices have moderated from MYR4,600-4,800/tonne in 1Q25 to a low of MYR3,780 in May, only to bounce back to MYR3,900-MYR4,100 currently. The decline was mainly driven by geopolitics in the light of US trade tariffs, wars, and crude oil prices falling as a result, all of which pushed CPO prices in the same direction. We highlight that the correlation between CPO prices and crude oil prices surged to 0.47 in Apr 2025 from -0.6 in 1Q25, and subsequently rose further to the current levels of 0.68, due to more geopolitical risks.
• What’s next for CPO prices? We expect CPO prices to remain volatile given the ever-changing geopolitical situation. Fundamentally however, global supply and demand will likely be more balanced in 2026F, as supply improves, while demand should pick up given the more attractive relative prices.
• Supply of 17 oils and fats complex is expected to improve YoY in 2026F, coming from a partial recovery of palm, sunflower and rapeseed supplies, as well as continued growth from soybeans. Still, the stock/usage ratio of the 17 oils and fats complex is still expected to remain below the historical average of 13.6%, at 12.9% for Oct 2025F/Sep 2026F, albeit up from 12.7% in 2025F. This leaves very little cushion in case of any short-term bullish supply or demand surprises, hence raising the risk of price volatility going forward.
• What does this mean for relative prices of vegetable oils and demand? Ignoring the noises from geopolitics, we expect 2026F to see: i) Muted soybean prices, due to continued strong supply in 2026F; ii) SBO prices remain supported at higher levels, due to the higher demand from increased US biofuel blending; iii) CPO prices to continue trading at a discount to SBO in the medium term (currently at USD217/tonne discount); and iv) demand from price sensitive countries like India, Pakistan, Bangladesh come back.
• We trim our CPO price to MYR4,100/tonne (from MYR4,300) for 2025F and to MYR4,000 (from MYR4,100) for 2026F and 2027F; but raise PK prices to MYR3,300/tonne for 2025F (from MYR2,800) and to MYR3,200 for 2026F and 2027F (from MYR2,600). We also update for our latest in-house forex assumptions and adjust forecasts by -1.3%, -7.8% and -6.7% for FY25-27.
• Downgrade to NEUTRAL. We roll forward our valuation to 2026F and lower its plantation division P/E target to 18x 2026F (from 20x 2025F), after updating its current historical average. With this, our TP falls to MYR20.65 (inclusive of a 4% ESG premium).

Source: Bloomberg

Forecasts and Valuation

Source: Company data, RHB

Overall ESG Score: 3.2 (out of 4)

E Score: 3.0 (GOOD)

S Score: 3.3 (EXCELLENT)

G Score: 3.3 (EXCELLENT)

Please refer to the ESG analysis on the next page

Emissions And ESG

Financial Exhibits

Figure 1: KLK’s progress on ESG factors

Source: Company data, RHB

Figure 2: KLK’s forecast assumptions

Source: RHB

Figure 3: KLK’s SOP valuation

Note: * Weighted average
Source: RHB

Figure 4: RNAV of KLK’s property landbank

Source: RHB

Recommendation Chart

Source: RHB, Bloomberg

Source: RHB, Bloomberg

RHB Guide to Investment Ratings

Buy:

Share price may exceed 10% over the next 12 months

Trading Buy:

Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain

Neutral:

Share price may fall within the range of +/- 10% over the next 12 months

Take Profit:

Target price has been attained. Look to accumulate at lower levels

Sell:

Share price may fall by more than 10% over the next 12 months

Not Rated:

Stock is not within regular research coverage

Investment Research Disclaimers

RHB has issued this report for information purposes only. This report is intended for circulation amongst RHB and its affiliates’ clients generally or such persons as may be permitted by applicable law. This report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. This report is not to be regarded as an offer to sell or a solicitation of an offer to buy any securities based on the information contained herein. Any recommendation contained in this report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is not intended to be and should not be construed as giving advice. This report is not to be taken in substitution for the exercise of judgment by addressees. Every investment involves some degree of risk. These risks include (but are not limited to) market risk, liquidity risk, credit risk and interest rate risk. Every investor is advised to seek independent advice from a financial adviser regarding the suitability of any investment product, taking into account the investor’s specific investment objectives, financial situation and particular needs, before making a commitment to purchase any investment product. The information contained in this report is based on sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness. No liability is accepted for any loss arising from the use of this report. All opinions and estimates contained in this report are subject to change without notice. Any reference to, among others, dividend payments are estimates only and are not guaranteed to be paid in the future. RHB and its affiliates and their directors, officers and employees may have positions in any securities mentioned in this report. RHB and its affiliates may perform investment banking or other services for the issuers of the securities mentioned in this report and may seek to do business with such issuers and may from time to time act as market maker or have assumed an underwriting commitment in securities of such issuers. The information contained in this report is strictly confidential and is for our clients’ information only. It may not be published, reproduced, distributed, transmitted or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose. This report is prepared solely for the use of RHB and its affiliates’ clients. You are hereby notified that any disclosure, copying, distribution or use of this report is strictly prohibited and may be unlawful. The contents of this report are also subject to change without notice. Please contact the analyst(s) if you have any queries in relation to this report. For reports issued outside Malaysia, the legal suitabilities and financial advisers’ comments therein are abandoned. Your acceptance of this report constitutes your agreement to be bound by the foregoing limitations.

Malaysia

This report is issued and distributed in Malaysia by RHB Investment Bank Bhd. The views expressed in this report are those of the analyst(s) preparing this report. Any remaining queries should be directed to the analyst(s) whom should be contacted if you have any queries concerning the contents of this report. This report is only distributed to clients who have been classified as “sophisticated investor” as defined under the applicable laws and regulations in Malaysia. RHB Investment Bank Bhd accepts full responsibility for the contents of this report, including the accuracy of the facts, views, opinions and forecasts expressed therein, and disclosure of any potential conflict of interests, if any, in this report.

Indonesia

This report is issued and distributed in Indonesia by PT RHB Sekuritas Indonesia. This research does not constitute an offering document and it should not be construed as an offer of securities in Indonesia. Any securities offered or sold, directly or indirectly, in Indonesia or to any Indonesian citizen or corporation (wherever located) or to any Indonesian resident in a manner which constitutes a public offering under Indonesian laws and regulations must comply with the prevailing Indonesian laws and regulations.

Singapore

This report is issued and distributed in Singapore by RHB Bank Berhad (through its Singapore branch) which is an exempt capital markets services entity and an exempt financial adviser regulated by the Monetary Authority of Singapore. RHB Bank Berhad (through its Singapore branch) may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, RHB Bank Berhad (through its Singapore branch) accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact RHB Bank Berhad (through its Singapore branch) in respect of any matter arising from or in connection with the report.

United States

This report was prepared by RHB is meant for distribution solely and directly to “major” U.S. institutional investors as defined under, and pursuant to, the requirements of Rule 15a-6 under the U.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”) via a registered U.S. broker-dealer as appointed by RHB from time to time. Accordingly, any access to this report via Bursa Marketplace or any other Electronic Services Provider is not intended for any party other than “major” US institutional investors (via a registered U.S broker-dealer), nor shall be deemed as solicitation by RHB in any manner. RHB is not registered as a broker-dealer in the United States and currently has not appointed a U.S. broker-dealer. Additionally, RHB does not offer brokerage services to U.S. persons. Any order for the purchase or sale of all securities discussed herein must be placed with and through a registered U.S. broker-dealer as appointed by RHB from time to time as required by the Exchange Act Rule 15a-6. For avoidance of doubt, RHB reiterates that it has not appointed any U.S. broker-dealer during the issuance of this report. This report is confidential and not intended for distribution to, or use by, persons other than the recipient and its employees, agents and advisors, as applicable. Additionally, where research is distributed via Electronic Service Provider, the analysts whose names appear in this report are not registered or qualified as research analysts in the United States and are not associated persons of any registered U.S. broker-dealer as appointed by RHB from time to time and therefore may not be subject to any applicable restrictions under Financial Industry Regulatory Authority (“FINRA”) rules on communications with a subject company, public appearances and personal trading. Investing in any non-U.S. securities or related financial instruments discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on non-U.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in the United States. The financial instruments discussed in this report may not be suitable for all investors. Transactions in foreign markets may be subject to regulations that differ from or offer less protection than those in the United States.

DISCLOSURE OF CONFLICTS OF INTEREST

RHB Investment Bank Berhad, its subsidiaries (including its regional offices) and associated companies, (“RHBIB Group”) form a diversified financial group, undertaking various investment banking activities which include, amongst others, underwriting, securities trading, market making and corporate finance advisory.

As a result of the same, in the ordinary course of its business, any member of the RHBIB Group, may, from time to time, have business relationships with, hold any positions in the securities and/or capital market products (including but not limited to shares, warrants, and/or derivatives), trade or otherwise effect transactions for its own account or the account of its customers or perform and/or solicit investment, advisory or other services from any of the subject company(ies) covered in this research report.

While the RHBIB Group will ensure that there are sufficient information barriers and internal controls in place where necessary, to prevent/manage any conflicts of interest to ensure the independence of this report, investors should also be aware that such conflict of interest may exist in view of the investment banking activities undertaken by the RHBIB Group as mentioned above and should exercise their own judgement before making any investment decisions.

In Singapore, investment research activities are conducted under RHB Bank Berhad (through its Singapore branch), and the disclaimers above similarly apply.

Malaysia

Save as disclosed in the following link RHB Research Conflict Disclosures Jul 2025 and to the best of our knowledge, RHBIB hereby declares that:

1. RHBIB does not have a financial interest in the securities or other capital market products of the subject company(ies) covered in this report.
2. RHBIB is not a market maker in the securities or capital market products of the subject company(ies) covered in this report.
3. None of RHBIB’s staff or associated person serve as a director or board member* of the subject company(ies) covered in this report
   *For the avoidance of doubt, the confirmation is only limited to the staff of research department
4. RHBIB did not receive compensation for investment banking or corporate finance services from the subject company in the past 12 months.
5. RHBIB did not receive compensation or benefit (including gift and special cost arrangement e.g. company/issuer-sponsored and paid trip) in relation to the production of this report.

Indonesia

Save as disclosed in the following link RHB Research Conflict Disclosures Jul 2025 and to the best of our knowledge, PT RHB Sekuritas Indonesia hereby declares that:

1. PT RHB Sekuritas Indonesia and its investment analysts, does not have any interest in the securities of the subject company(ies) covered in this report.
   For the avoidance of doubt, interest in securities include the following:
   1. Holding directly or indirectly, individually or jointly own/hold securities or entitled for dividends, interest or proceeds from the sale or exercise of the subject company’s securities covered in this report*;
   2. Being bound by an agreement to purchase securities or has the right to transfer the securities or has the right to pre subscribe the securities*.
   3. Being bound or required to buy the remaining securities that are not subscribed/placed out pursuant to an Initial Public Offering*.
   4. Managing or jointly with other parties managing such parties as referred to in (a), (b) or (c) above.
2. PT RHB Sekuritas Indonesia is not a market maker in the securities or capital market products of the subject company(ies) covered in this report.
3. None of PT RHB Sekuritas Indonesia’s staff** or associated person serve as a director or board member* of the subject company(ies) covered in this report.
4. PT RHB Sekuritas Indonesia did not receive compensation for investment banking or corporate finance services from the subject company in the past 12 months.
5. PT RHB Sekuritas Indonesia** did not receive compensation or benefit (including gift and special cost arrangement e.g. company/issuer-sponsored and paid trip) in relation to the production of this report:

Notes:
*The overall disclosure is limited to information pertaining to PT RHB Sekuritas Indonesia only.
**The disclosure is limited to Research staff of PT RHB Sekuritas Indonesia only.

Singapore

Save as disclosed in the following link RHB Research Conflict Disclosures Jul 2025 and to the best of our knowledge, the Singapore Research department of RHB Bank Berhad (through its Singapore branch) hereby declares that:

1. RHB Bank Berhad, its subsidiaries and/or associated companies do not make a market in any issuer covered by the Singapore research analysts in this report.
2. RHB Bank Berhad, its subsidiaries and/or its associated companies and its analysts do not have a financial interest (including a shareholding of 1% or more) in the issuer covered by the Singapore research analysts in this report.
3. RHB Bank Berhad’s Singapore research staff or connected persons do not serve on the board or trustee positions of the issuer covered by the Singapore research analysts in this report.
4. RHB Bank Berhad, its subsidiaries and/or its associated companies do not have and have not within the last 12 months had any corporate finance advisory relationship with the issuer covered by the Singapore research analysts in this report or any other relationship that may create a potential conflict of interest.
5. RHB Bank Berhad, or person associated or connected to it do not have any interest in the acquisition or disposal of, the securities, specified securities based derivatives contracts or units in a collective investment scheme covered by the Singapore research analysts in this report.
6. RHB Bank Berhad’s Singapore research analysts do not receive any compensation or benefit in connection with the production of this research report or recommendation on the issuer covered by the Singapore research analysts.

Analyst Certification

The analyst(s) who prepared this report, and their associates hereby, certify that:
(1) they do not have any financial interest in the securities or other capital market products of the subject companies mentioned in this report, except for:

(2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

KUALA LUMPUR

RHB Investment Bank Bhd
Level 3A, Tower One, RHB Centre
Jalan Tun Razak
Kuala Lumpur 50400
Malaysia
Tel: +603 2302 8100
Fax: +603 2302 8134

JAKARTA

PT RHB Sekuritas Indonesia
Revenue Tower, 11th Floor, District 8 – SCBD
JI. Jendral Sudirman Kav 52-53
Jakarta 12190
Indonesia
Tel: +6221 5093 9888
Fax: +6221 5093 9777

SINGAPORE

RHB Bank Berhad (Singapore branch)
90 Cecil Street
#04-00 RHB Bank Building
Singapore 069531
Fax: +65 6509 0470