PETALING JAYA: SD Guthrie Bhd
is optimistic that higher crude palm oil (CPO) prices will more than offset rising costs for diesel, fertiliser and shipping should energy prices remain at current elevated levels, amid a prolonged US-Israel war with Iran, says CIMB Securities Research.
The group noted a significant rise in diesel prices at its Papua New Guinea (PNG) operations and some delays in palm oil shipments to the Middle East, although its exposure to the troubled region is limited.
In a recent analyst briefing, CIMB Research said SD Guthrie highlighted that its fertiliser costs are already locked in for 2026 and discussions are ongoing with suppliers to ensure timely delivery. Fertiliser accounts for about 27% to 28% of direct costs, while diesel makes up less than 5%.
However, the group cautioned that its operations in Indonesia and PNG could be affected if diesel supply is disrupted due to a prolonged conflict, the research house said in a note to clients.
That said, management believes the impact is likely to be more than offset by higher CPO prices, as elevated energy prices could prompt major palm oil-producing countries to increase biodiesel mandates to enhance energy security, thereby supporting palm oil demand.
SD Guthrie also said it has forward sold 42% of its Malaysian palm oil production at a CPO price of RM4,400 per tonne.
Meanwhile, management said its existing land deals are unaffected by the new Economy Ministry guideline that requires purchasing firms to have at least 50% effective bumiputra equity ownership for property (including land) disposals of RM20mil and above by bumiputra interests, government-linked companies and government-linked investment companies.
CIMB Research said: “SD Guthrie believes the government’s recent decision to approve a proposal to build a port on Carey Island to be positive for the group as it has three pending land joint ventures there.”
Meanwhile, the research house said Shahrizal Suhainy’s recent appointment as SD Guthrie’s new chief financial officer (CFO) effective May 1 will be a seamless transition as he has been with the group since November 2022.
He will succeed Renaka Ramachandran, who will take on a new role as chief executive officer of SD Guthrie’s land and renewable energy segment. Overall, CIMB Research is neutral on the CFO transition and views it as part of the group’s succession planning.
Renaka will remain with the group to drive the new segment, which SD Guthrie expects to generate RM500mil to RM700mil in annual profit, it added. It has maintained its “hold” call on the stock with an unchanged target price of RM6.23 per share.
