PETALING JAYA: Sarawak Oil Palms Bhd
’s commendable first quarter results of its financial year 2025 (1Q25), reflects a solid start for the plantation group, say analysts.
The planter posted 1Q25’s core profit after tax and minority interests of RM118.9mil, up 32% year-on-year (y-o-y), which was mostly in line with consensus estimates.
Revenue for the quarter under review also rose to RM1.4bil, driven by higher realised palm product prices, which offset the lower production.
BIMB Securities Research anticipated a recovery in the group’s output growth moving forward.
The planter’s fresh fruit bunch (FFB) production is expected to rise by 5% y-o-y in FY25, backed by normalised weather conditions following heavy rainfall earlier this year, said the research house.
It noted that Sarawak Oil Palms primarily sells on the spot market, and it would benefit from favourable crude palm oil (CPO) prices in 1H25.
However, its downstream segment remained challenging, due to intense competition and uncertainties in demand arising from global trade tensions.
“Despite these headwinds, its management expects gradual improvements driven by higher utilisation rates and better product mix,” the research house added.
Given the planter’s resilient upstream outlook and attractive valuations, BIMB Research has maintained a “buy” call on the stock with an unchanged target price (TP) of RM3.75 per share.
Meanwhile, RHB Research, in a report, said Sarawak Oil Palms started the year on the right footing as 1Q25 earnings had met consensus expectations.
“Moving forward, we expect Sarawak Oil Palms to deliver a consistent earnings track record, as output continues to improve, but it may be offset by moderating CPO prices,” it noted.
Given its position as a pure-play planter with an above-average earnings before income tax per hectare, RHB Research said the valuation is currently undemanding, trading at 5.3 times 2025 price earnings, which is below its peer range of seven times to 11 times.
Sarawak Oil Palms did not engage in forward sales, RHB Research said adding that “we are keeping our FY25 CPO price assumption of RM4,300 per tonne.”
The research house has also kept the group’s FFB growth forecasts for FY25 and FY26 unchanged at 5% and 6%, respectively, and up 3% for FY27.
Similarly, it maintained Sarawak Oil Palms’ unit cost assumptions, as “we expect output recovery in the coming quarters, which should bring down unit costs accordingly.”
On the group’s downstream operation, RHB Research said the segment would face challenges, no thanks to the current volatility in the market.
“While Malaysia’s palm oil may appear attractive compared with Indonesia thanks to lower US tariffs (24% versus 32%), this may be offset by Indonesia’s more advantageous tax structure (at 17.9% versus Malaysia’s 10%), after assuming the recent proposal to revise export tax for palm oil by 5% lower and CPO levy by 2.5%.
“As such, we remain cautious on the segment’s performance and keep our conservative estimates for the utilisation rate (75%) and margin assumptions of 3%,” it added.
The research house said it made no changes to Sarawak Oil Palm’s earnings as CPO prices continue to moderate at RM4,658 per tonne.
It has also kept the stock’s TP unchanged at RM4.80 per share. The shares closed 1.34% higher yesterday at RM3.02.
