MBSB Research remains positive on the group’s near-mid-term outlook.
PETALING JAYA: IOI Corp Bhd
’s first integrated coconut mill complex in Segamat, Johor will complement its existing downstream operations and the venture is expected to break even in two years.
According to MBSB Research, it will enable the plantation group to offer high-value coconut lauric-based derivatives and strengthen its position in the specialty oils and fats segment.
Hence, the research house has remained positive on the group’s near-mid-term outlook.
It said IOI Corp’s upstream operations are expected to contribute over 90% profit and more than 40% margins in its financial year 2026 (FY26) to FY28.
This is supported by fresh fruit brunch output growth of 5% to 10%, thanks to a decent age profile of 13 years and low costs of RM1,900 to RM2,000 per tonne.
IOI Corp is diversifying into coconuts by partnering with Taiwan’s Mega Star to build a large, sustainable coconut processing complex, which is set for completion by the fourth quarter of 2027.
The joint venture with Megastar is primarily aimed at securing a stable off-taker for concentrated coconut water, as IOI Corp sees strong demand potential, particularly from China’s food and beverage sector.
With coconut oil forming the earnings backbone and commanding a premium to palm kernel oil (PKO), margins should improve, while the Megastar partnership secures demand visibility, said MBSB Research.
Overall, the venture offers scalable, value-accretive returns over the medium to long term, the research house added.
The project will adopt a full-utilisation coconut model anchored by coconut oil, which accounts for 70% of output, alongside concentrated coconut water and by-products.
“All parts of the coconut are going to be monetised – husks are used as factory fuel, shells are sold externally and copra channelled into animal feed,” the research house said.
Coconut oil remains the core commercial focus, leveraging IOI Corp’s existing PKO customer base, given that both are lauric oils.
It typically commands a 30% to 40% premium over PKO, which should support margin expansion within the Resource-Based Manufacturing sub-segment.
Malaysia’s coconut demand exceeded domestic supply, with an estimated self-sufficiency ratio of around 60%, leaving a structural 40% import gap, said the research house.
There will be some portions to be spared to cater for the local demand.
Broadly, Thailand focuses mainly on fresh drinking coconuts, while Indonesia and the Philippines dominate fresh milk and coconut oil processing.
MBSB Research has maintained its “buy” call on the stock with an unchanged target price of RM4.42 a share.
