Sime Darby Plantation outlook seen remaining bullish on FFB yield

KUALA LUMPUR: MIDF Research remains bullish on Sime Darby Plantation Bhd's (SDP) outlook this year due to its fresh fruit bunch (FFB) yield, "fairly prime” oil palm trees’ age profile of 12.1 years and well integrated operations.

It said SDP’s FFB yield "ranks among the top tiers, and the integrated operation of the manufacturing segment would (offset) a decline in the average selling price for crude palm oil (CPO), thus lowering the volatility of earnings.”

"Hence, we maintained a 'buy' call on SDP with a target price of RM5.50 based on the unchanged earnings per share for the financial year 2023 of 25 sen," the research house said in a note today.

Elaborating on Malaysia's FFB outlook, MIDF has predicted the output would increase by 12 per cent on the back of better performance of Malaysian estates as a result of the improvement in the labour shortage situation in the sector.

On SDP’s recent disposals of its Indonesian units PT Ladangrumpun Suburabadi (LSI) and PT Sajang Heulang (SHE), the research house said it stands "neutral” on the latest development in line with the company’s internal reorganisation of its non-core operations.

Last Friday, two wholly-owned Indonesian subsidiaries of SDP, namely PT Anugerah Sumbermakmur and PT Minamas Gemilang, agreed to sell their collective 100 per cent stakes in the two plantation companies to PT Global Berkat Usahatama.

The Indonesian subsidiaries sold their collective 100 per cent equity interest in PT LSI and PT SHE for a combined total of RM518 million.

At 10.40 am, SDP shares shed one sen to RM4.26, with 55,800 shares transacted. - Bernama