Kim Loong has consistently paid decent dividends for the last three financial years. The 13 sen each it paid in FY2014 and FY2015 gave shareholders a 4.7% to 5% yield.

Shareholders have also enjoyed decent capital appreciation in recent years. Commanding a RM1.01 billion market capitalisation as it closed at RM3.26 on Aug 10, the stock is up 7.6% year to date and is 48% above its 52-week low of RM2.20 reached last August. During the award’s three-year judging period until March 31, 2016, its share price has nearly doubled to RM3.59 from RM1.84 on March 31, 2013.

Kim Loong’s efficiency has enabled it to stand out among the country’s smaller crude palm oil (CPO) millers and growers. Unlike its peers, the Johor-based planter’s milling operations continue to generate strong earnings even as CPO and fresh fruit bunches (FFB) fetched lower prices.

Kim Loong is 64% owned by the Gooi family, which also owns locally-listed property development firm Crescendo Corp Bhd. Gooi Seong Lim, one of the top 50 richest people in Malaysia, shares his fortune with three younger brothers — Seong Heen, Seong Chneh and Seong Gum.

In an interview with The Edge in June, Seong Heen, who is managing director of Kim Loong, acknowledges that the group’s milling operation is facing challenges, in view of the drastic decrease in the oil extraction rate (OER) and a shortage of crops, mainly due to the hot and dry weather caused by the El Niño phenomenon. The uneven ripening of FFB in recent months will further impact the OER, which is one of the measures plantation analysts use to track efficiency.

The company’s mill in Kota Tinggi, Johor, which is capable of processing 100 tonnes of FFB per hour, is the most seriously affected. Kim Loong operates two other mills — in Keningau and Telupid in Sabah — with an FFB processing capacity of 90 tonnes and 60 tonnes per hour respectively. The three mills can process 1.8 million tonnes of FFB annually, but are only running at 80% to 90% capacity.

Given the abnormal ripening of FFB leading to lower OER, Seong Heen expects the profit margin and earnings contribution from the downstream business to decline in FY2017.

In FY2016, the milling business accounted for more than 50% of profit, but it is now expected to drop to 40% in FY2017, mainly due to the better profitability of the plantation business.

In a June 30 report, UOB Kay Hian Research analyst Ooi Mong Huey expects Kim Loong to deliver a net profit of RM74 million in FY2017, RM99.5 million in FY2018 and RM102.8 million in FY2019. She has a “buy” call and RM4.20 target price and expects Kim Loong to offer decent dividend yields of 3.9%, 5.3% and 5.4% in FY2017 to FY2019 respectively.