PETALING JAYA: CIMB Research has initiated coverage on United Malacca Bhd
, as it views the mid-cap plantation group as an undervalued asset-backed play with improving operational prospects.
In a report, the research house said the stock also offers steady dividends, potential upside from land monetisation in Peninsular Malaysia and yield recovery from its younger Indonesian estates.
It has a “buy” rating and a target price of RM6.42 on the stock based on a 20% discount to its sum-of-parts valuation of RM8.03 per share.
“With consistent dividends, improving operational efficiency, and renewed confidence from strategic shareholder the Prosper Group, we see United Malacca as an undervalued mid-cap plantation play, supported by resilient crude palm oil (CPO) prices and long-term asset monetisation potential,” the research house said in a note to clients.
It said the valuation remains undemanding at 0.8 times next year’s price-to-book value, supported by a forecast dividend yield of about 2%.
The Prosper Group holds a 32% stake in the company, which owns 48,189ha of plantation land as of April 30.
Of this, 32,842ha is planted area, while 15,347ha is unplanted.
United Malacca, a pure upstream oil palm producer has 14 estates and two palm oil mills in Malaysia, and five estates and one mill in Central Kalimantan, Indonesia.
The three mills have a combined processing capacity of 125 tonnes per hour, said the research house.
“United Malacca’s strengths lie in its well-managed’ Malaysian estates and the growing contribution from its younger Indonesian operations, where 72% of palms are in their prime age.
“We forecast fresh fruit bunch output to rise by between 2% and 3.5% annually from 2026 to 2028 for the financial years ending April 30 (FY26 to FY28), supported by yield improvement from replanting areas, mechanisation, and better field management.”
However, the research house flagged that growth prospects are moderated by United Malacca’s smaller scale compared with peers and its ageing Malaysian estates.
“About 34% or about 6,624ha of its Malaysian planted area is over 20 years old and some are due for replanting, which could temporarily affect output and margins.
“While the company’s Indonesian operations offer medium-term upside, they are exposed to regulatory risks, cost inflation, and environment, social, and governance scrutiny.”
The research house forecasts core net profit of RM101.8mil, RM97.4mil, and RM96.9mil for FY26, FY27, and FY28, respectively.
This, it said, represents between 1% and 13% decline from record FY25 earnings, mainly due to lower assumed CPO prices of RM3,982 to RM4,069 per tonne and palm kernel prices of RM2,825 to RM2,886 per tonne
Nevertheless, it said rising FFB output from the Indonesian estates and yield recovery in Malaysian replanting areas should cushion the earnings moderation.
United Malacca’s net cash stood at RM155mil as of the end of April.
The research house said the group’s shareholder base has strengthened following the entry of Prosper Group.
Prosper Group is held by the Tee family with a 60% stake, while the remaining 40% is owned by Far East Holdings Bhd, a Pahang state-controlled plantation company. The second-largest shareholder in United Malacca is Great Eastern Life Assurance (M) Bhd with a 13.4% stake.
CIMB Research said United Malacca also retains its family legacy through the Tan family, with founder Tun Tan Cheng Lock’s granddaughter, Datin Paduka Tan Siok Choo, serving as chairperson.
“We estimate that the descendants of the founding Tan family collectively represent the third largest shareholder group, holding approximately 12.5% of United Malacca’s shares.”
