RHB Research forecasts strong results for the group in the fourth quarter of 2025.
PETALING JAYA: Sarawak Oil Palms Bhd
is targeting higher dividend payouts once its net cash position exceeds RM1.5bil following strong earnings, according to RHB Research.
The research house, however, only expects the higher payout to materialise in the financial year ending December 2026 (FY26), projecting an increase in payout from 21% in FY24 to 25% to 27% for FY26 and FY27.
The group had net cash of RM1.3bil as of the first nine months of 2025 (9M25) and paid an 11 sen dividend per share (DPS) in FY24.
“We expect FY25 DPS to remain at 12 sen, representing a payout of 22.1%,” it said in a note.
The research house forecast strong results for the group in the fourth quarter of 2025 (4Q25), driven by higher production of fresh fruit bunches (FFB), crude palm oil (CPO) and palm kernels (PK), despite moderating selling prices.
RHB Research estimated a 10% to 27% quarter-on-quarter (q-o-q) rise in Sarawak Oil Palms’ core net profit after tax and minority interests to RM130mil to RM150mil, which would make it the strongest quarter of the year.
It said production volumes for FFB, CPO and PK increased q-o-q by 16%, 32% and 39%, respectively.
“Volume growth should more than offset weaker average selling prices, as spot prices fell 2.7% q-o-q for CPO and 3.3% q-o-q for PK,” the brokerage firm said.
It also noted that FY25 output growth of 3.13% for FFB, minus 1.4% for CPO and 2.3% for PK exceeded its original expectations of 2.65%, minus 8.6% and minus 5.5%, adding that this was likely due to higher-than-expected external FFB purchases.
According to the research house, unit cost of production for FY25 was lower year-on-year (y-o-y) but is expected to rise in FY26.
“With the improved FFB output (3.13% y-o-y), management expects FY25 production costs to decline to RM2,400 to RM2,500 per tonne, driven by lower fertiliser prices, higher kernel credits and internal process streamlining,” it said.
While management hopes to keep unit costs flat for FY26, RHB Research has taken a more conservative stance, predicting unit cost increases of 6% (FY25) and 4% (FY26), due to higher fertiliser costs and replanting activity.
It also expects lower FY26 margins for the company’s downstream segment due to intensifying competition as well as Indonesia’s planned export levy changes.
According to the research house, management said its downstream segment remains profitable despite lower utilisation of 85% and is actively pursuing better pricing and higher quality buyers outside India to counter challenges in the Indian market.
Overall, RHB Research raised its FY25 to FY27 earnings forecasts for Sarawak Oil Palms by 0.1%, 1.75% and 0.5%, respectively. It also maintained its “buy” call on the company, with a new target price of RM4.22, up from RM4.15.
The updated target price is based on an unchanged nine times FY26 price-to-earnings ratio.
