Aug 17 2012
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RAM Ratings assigns AA1/Stable rating to KLK's Multi-Currency Islamic Debt Programme
At the same time, the ratings of the Group's existing RM300 million Sukuk Ijarah Commercial Paper/Medium-Term Notes Programme (2011/2016) have been reaffirmed at AA1/Stable/P1.
KLK is an integrated oil-palm plantation player with established upstream and downstream activities. It is a leading planter in Malaysia and Indonesia with a sizeable plantation land bank of more than 250,000 hectares. The Group's fresh fruit bunch yields rank among the top 5 in Malaysia and are comparable to those of its regional peers. Its established track record in the plantation sector is reflected in its commendable operating efficiency and lean cost structure. Despite the recent minimum wage policy, KLK is expected to maintain its low cost competitiveness.
KLK's ratings are moderated by its ambitious expansion into oleochemicals, an industry vulnerable to high feedstock prices and overcapacity, particularly in basic oleochemicals. In this regard, we believe the Group's management will take a measured approach and maintain its robust balance sheet. The ratings also factored in inherent risks of the industry including volatile crude palm oil ("CPO") prices which largely dictate the bottom-line of oil palm-based companies like KLK. Prices of CPO, as a commodity, are subject to many factors beyond the planter's control. Additionally, regulatory changes including the recent change in the export tax structure in Indonesia, typify some of the additional risks associated with the industry.
Chan Yin Huei
(603) 7628 1180
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