On CPO prices, HLIB Research has maintained its 2026 price assumption of RM4,200 per tonne.
PETALING JAYA: The plantation sector’s upcoming results for the fourth quarter of financial year 2025 (4Q25) will likely be broadly in line with expectations despite weaker year-on-year (y-o-y) upstream segment performance.
In its 4Q25 sector preview, Hong Leong Investment Bank (HLIB) Research pointed out that quarter-on-quarter (q-o-q) earnings are expected to be mixed, reflecting an uneven fresh fruit bunch (FFB) output trend.
Despite a seasonally lower cropping pattern, four out of seven planters under HLIB Research’s coverage, namely, Genting Plantations Bhd
, Hap Seng Plantations Holdings Bhd, IOI Corp Bhd and Kuala Lumpur Kepong Bhd (KLK) recorded positive q-o-q growth in FFB output.
“We attribute this mainly to cropping pattern shifts in parts of Malaysian estates. As a result, we expect planters to report mixed q-o-q earnings in the upcoming results season,” the research house noted.
Only Hap Seng Plantations, IOI, KLK and Johor Plantations Group Bhd under its coverage registered positive FFB output growth, while Genting Plantations, SD Guthrie Bhd and TSH Resources Bhd posted declines.
HLIB Research said: “In our view, this reflects improved yields in Malaysia being offset by weaker Indonesian yields, mainly due to a shift in cropping patterns in the latter part of 2025.”
Despite mixed y-o-y FFB output trends, it added that upstream earnings would likely come in lower y-o-y, as the output growth was insufficient to offset the decline in crude palm oil (CPO) and palm kernel (PK) prices and the full impact of the minimum wage hike implemented since February 2025.
Meanwhile, the downstream operating environment likely remained challenging amid the export tax and levy differential between Malaysia and Indonesia and ongoing overcapacity in Indonesia, although this was partly mitigated by lower feedstock prices.
On CPO prices, HLIB Research has maintained its 2026 price assumption of RM4,200 per tonne.
For now, its earnings forecasts are pending a review following Indonesia’s recent move to delay the implementation of its B50 mandate.
HLIB Research has kept an “overweight” stance on the sector with its top “buy” picks SD Guthrie at a target price of RM6.49 and Hap Seng Plantations with a target price of RM2.57.
The research house favoured SD Guthrie for its ongoing efforts to diversify earnings drivers (particularly through expansion into renewable energy and industrial property developments by leveraging its prime landbank), improving balance sheet, and decent dividend yield of 3% to 4%.
It also liked Hap Seng Plantations for its solid balance sheet (net cash and net cash per share of RM653.6mil and 81.7 sen respectively as at June 30, 2025), and high operating leverage to CPO price movement, positioning it well to benefit from high CPO price.
