PETALING JAYA: A constructive outlook for crude palm oil (CPO) prices over the near to medium term has resulted in analysts maintaining an “overweight” stance on the plantation sector.
In a note, Hong Leong Investment Bank (HLIB) Research said CPO prices retreated from its high of RM4,505 per tonne in early October to about RM4,000 per tonne recently.
According to the research house, the recent price weakness was driven mainly by a delay in the country’s production and China’s resumption of soybean oil imports from the United States.
“We view the recent price weakness as temporary, supported by the impending seasonally lower cropping cycle and palm oil’s improved price competitiveness relative to other vegetable oils,” HLIB Research said.
However, for the longer term, concerns over palm oil output due to confiscations in Indonesia and the limited progress in large-scale replanting activities could underpin CPO prices at an elevated level.
“As such, we maintain our average CPO price assumptions of RM4,300 per tonne for 2025 and RM4,200 per tonne for 2026,” it noted.
Meanwhile, HLIB Research said, in the recent results season, most plantation companies delivered earnings that were either in line or above expectations.
It said Johor Plantations Group Bhd
, IOI Corp Bhd and TSH Resources Bhd outperformed, while Genting Plantations Bhd, Hap Seng Plantations Holdings Bhd and SD Guthrie Bhd met expectations.
In contrast, Kuala Lumpur Kepong Bhd was a miss, dragged by weaker-than-expected manufacturing performance and softer fresh fruit bunch (FFB) output growth.
On a quarterly basis, upstream earnings were higher on the back of a better cropping trend, though partly weighed down by slightly lower realised palm product prices and higher CPO production cost.
The research house said yearly, higher realised palm product prices and generally higher FFB output had lifted upstream earnings for most of the plantation companies under its coverage for the third quarter of 2025.
Its top picks include SD Guthrie and Hap Seng Plantations for its ongoing efforts to diversify earnings drivers, improving balance sheet and decent dividend yield of 3% to 4%.
