HLIB Maintains 'Neutral' Call On Malaysian Plantation Sector Amid Mixed Outlook
KUALA LUMPUR, May 13 (Bernama) -- Hong Leong Investment Bank Bhd (HLIB) has maintained its 'neutral' call on the plantation sector, citing a lack of clear demand catalysts and mixed earnings prospects across both upstream and downstream segments.
In a research note today, the bank said planters are likely to post decent year-on-year (y-o-y) results for the first quarter of 2025 (1Q 2025), supported by firm palm product prices.
However, it noted quarter-on-quarter (q-o-q) earnings may be weaker, as lower output—due to seasonal cropping patterns and heavy rainfall in parts of Malaysia—combined with softer palm product prices, is expected to drag down upstream performance in 1Q 2025.
“During the quarter, all planters under our coverage registered negative fresh fruit bunch (FFB) output growth, ranging from -4.9 per cent to -27.7 per cent,” it said, adding that production in Indonesia fared relatively better due to different cropping patterns.
The bank added that earnings from the downstream segment are expected to remain subdued, pressured by Malaysia’s export tax structure, high input costs, and a lower price differential with Indonesian products.
On a company-specific basis, HLIB said TSH Resources Bhd recorded the smallest q-o-q decline in FFB output at -4.9 per cent.
“We believe this was primarily due to a recovery in crop yield, driven by a shift in the cropping pattern in Indonesia and the resolution of a social dispute at one of its plantation operations in the country,” it said.
Meanwhile, Hap Seng Plantations Bhd posted an 11.3 per cent y-o-y decline in output, as harvesting activities were disrupted by floods in early 2025, despite a recovery in March.
HLIB also said its crude palm oil price assumptions for 2025 and 2026 remain unchanged at RM4,000 and RM3,800 per tonne, respectively.
“Our top picks are SD Guthrie Bhd, with a target price of RM5.17; Jaya Tiasa Holdings Bhd (RM1.35); and IOI Corporation Bhd (RM4.24), it said.
-- BERNAMA