MBSB Research said the group’s production visibility remained strong.
PETALING JAYA: MBSB Research expects Sarawak Plantation Bhd
’s earnings visibility to remain stable despite recent short-lived wet weather disruptions.
The research house, which had met with the planter’s management team, said its financial year 2026 (FY26) outlook is well supported by an expanding harvestable area of nearly 1,000ha with cost of production on a declining trend.
This reflects improving scale and operational efficiencies, which should underpin steady and resilient operating performance going forward, according to the research house.
MBSB Research said the group’s production visibility remained strong, with FY25 output guided for about 360,000 tonnes and a further 20% to 25% growth expected in FY26 as newly mature hectarage of about 900ha in FY26 and an estimated 1,000ha from mid-2025 contributions.
Yield performance has also improved structurally, rising from 16 tonnes per ha in 2023 to an estimated over 18 tonnes per ha in FY26.
“The management expects external fresh fruit bunch (FFB) purchases to rise modestly in absolute terms, but decline as a proportion of total intake from around 50% currently to less than 40% in FY26 as internal production ramps up,” said MBSB Research.
This is a strategic game rather than a demand issue.
Furthermore, greater reliance on internal FFB improves quality control, harvesting timing and oil extraction rate (OER), while reducing margin volatility.
Management highlighted the stark margin gap between estate operations about 35% and mill-based activities around 4%, reinforcing this strategy.
Meanwhile, the group’s cost pressures remained manageable despite fertiliser prices averaging about RM1,400 per tonne in FY25, with a potential 5% to 10% increase next year.
However, this is expected to be partially offset by a firmer ringgit.
MBSB Research noted the group’s cost of crude palm oil production is estimated less than RM2,700 per tonne in FY25 with a meaningful reduction to RM2,400 per tonne in FY26 as volumes scale and fixed costs are diluted.
Encouragingly, labour availability has largely normalised, alleviating a key operational bottleneck.
MBSB Research noted that it retained Sarawak Plantation’s earnings estimate as it aligns with baseline projection.
Note that the company is purely a local company and well insulated from Indonesia’s regulatory risk.
Operational-wise, the group will focus particularly on field supervision, improved road maintenance and tighter pest management have helped stabilise yields and OER.
Overall, emphasis remains on consistent harvesting efficiency, cost discipline and estate-level productivity rather than aggressive expansion or mergers and acquisitions.
MSBS Research has kept a “’neutral” call on the stock with an unchanged target price of RM2.88 per share.
For its third quarter ended Sept 30, 2025, Sarawak Plantation’s net profit was flat at RM31.12mil, compared with RM31.07mil in the previous corresponding period, while revenue was lower at RM139.68mil from RM149.07mil previously.
