PETALING JAYA: The plantation sector enters 2026 against a backdrop of evolving policy dynamics, shifting climate risks and changing global trade flows, says TA Research.
Recent developments such as Indonesia’s delay in implementing the B50 biodiesel mandate, the rising risk of the El Nino weather phenomenon, and ongoing geopolitical tensions between the United States and Europe underscore the complex interplay between regulatory frameworks, weather patterns and supply chain realignments.
Foreign participation trends and capital allocation strategies also remain important barometers of investor sentiment and sector positioning, TA Research said in a report yesterday.
As the market transitions from the post-El Nino recovery into a potentially more uncertain climatic phase in the second half of 2026, the brokerage said visibility on production, policy implementation and capital return discipline will be key determinants of sector performance.
Under its base-case assumption, the research house expects 2026 to mark a year of production recovery following the lagged impact of the 2023-2024 El Nino.
However, should a new El Nino emerge in mid-2026, it could materially impact both production and prices, given crude palm oil’s (CPO) historical sensitivity to strong El Nino events.
TA Research noted that SD Guthrie Bhd
, United Malacca Bhd and Kim Loong Resources Bhd are sensitive to CPO price fluctuations, as revenue from these upstream plantation players is heavily dependent on fresh fruit bunch yields and CPO production.
On another note, foreign shareholdings in Kuala Lumpur Kepong Bhd (KLK), SD Guthrie and IOI Corp Bhd generally trended lower since 2019, after peaking in 2018 and 2019.
However, January and February 2026 showed signs of selective re-accumulation, particularly in SD Guthrie.
Beyond expectations of seasonally stronger earnings and stabilising CPO prices, TA Research believes the renewed interest could be linked to ongoing land monetisation initiatives, which unlock embedded value from its sizeable landbank.
“We expect foreign participation to remain selective and catalyst-focused in the near term.
“A sustained recovery in CPO prices, stronger earnings delivery and clearer capital return policies could support further re-engagement,” TA Research added.
The brokerage has maintained a “neutral” stance on the plantation sector and assumes average CPO prices of RM4,000 per tonne in 2026.
It maintained “buy” calls on KLK with a target price (TP) of RM23.09 per share, TSH Resources at RM1.43 and United Malacca at RM6.72 respectively.
TA Research also kept its “hold” call on Kim Loong at a TP of RM2.47, with “sell” calls on IOI at RM3.97 and SD Guthrie at RM5.63 per share.
