PETALING JAYA: United Malacca Bhd
’s Indonesian planting and sustained crude palm oil (CPO) prices are the main drivers of its prospects going forward.
Kenanga Research said the plantation group’s core net profit for the nine-month period of the financial year 2025 (9M25) met both its own and consensus 12-month estimates.
According to Kenanga Research, United Malacca’s 9M25 turnover increased 25% year-on-year (y-o-y).
This was driven by stronger CPO prices, a slightly better fresh fruit bunch (FFB) harvest and lower costs, which expanded pre-tax profit margins from 12% a year ago to 19%.
This resulted in pre-tax profit doubling y-o-y from RM35.4mil to RM73.2mil in 9M25.
Revenue for the third quarter of FY25 (3Q25) was flat quarter-on-quarter (q-o-q), although growing by 26% y-o-y.
This showing was underpinned by a stronger CPO price of RM4,687 per tonne, which offset a weaker FFB harvest of 107,781 tonne due to seasonality and heavy rain in Malaysia.
With two-thirds of United Malacca’s Indonesian planting entering prime production age, Kenanga Research expects higher FFB output, lower unit costs and more consistent profits, moving forward.
“Nevertheless, the FY25 Indonesian harvest has been affected by floods.
“Full-year output should hold flat y-o-y and at about 60% above FY21 to FY23 annual harvest,” the research house said.
It added that beyond FY25, FFB production is expected to grow.
This is thanks to rising FFB yields as existing young trees mature into higher-yielding age brackets, the expansion of planting from 8,000ha to about 11,000ha and y-o-y recovery from the floods in the first half of FY25.
“Some 20% to 30% of the group’s estates in Malaysia are also due for replanting; hence, growth from Indonesia is expected to be key,” Kenanga Research said.
The research house said CPO prices will likely remain elevated.
This is because they are set to be driven by another year of global edible oil supply deficit.
This is despite them having eased from the recent peak in November 2024.
“Hence, we are adjusting up our expected CPO per tonne for United Malacca over FY25 to FY26 from RM4,000 to RM4,300 for FY25 and RM4,100 for FY26.
“Meanwhile, CPO cost is expected to stay muted in spite of rising minimum wages, thanks to recovering yields, flattish fertiliser cost and good palm kernel prices,” Kenanga Research said.
The research house maintained its “outperform” call on United Malacca with a target price of RM6.30 per share.
Meanwhile, TA Research said it expects the group’s FFB production to increase largely due to improved harvesting activities.
This is following the resolution of labour shortage issues and improved weather conditions.
However, the research house anticipates a more cautious outlook for CPO prices, influenced by weaker exports, lower demand from major importing countries and an expected rise in global vegetable oil supply.
TA Research has a “buy” call on United Malacca with a target price of RM5.95 a share.
