PETALING JAYA: Analysts have lowered their financial year ending April 30, 2027 (FY27) earnings forecast for plantation company United Malacca Bhd
by 19% after factoring in higher production costs and a higher effective tax rate.
TA Research had, however, raised FY28 earnings by 4.9%, as the impact is more than offset by its higher crude palm oil (CPO) price assumption.
“We now assume blended average CPO selling prices, incorporating both the Malaysian and Indonesian operations, of RM4,200/ per tonne for FY27 and RM4,300 per tonne for FY28”, it said.
TA Research noted that the group reported a weaker-than-expected first quarter financial year 2027 (1Q27) result, with core net profit declining 46.5% year-on-year (y-o-y) and 33.4% quarter-on-quarter to RM18.8mil.
Revenue fell 6% y-o-y to RM180.1mil, while earnings were weighed down by weaker Malaysian fresh fruit bunch (FFB) production, higher unit production costs and a higher effective tax rate, it noted.
It said Indonesia remained the bright spot, with plantation profit increasing more than five-fold y-o-y to RM20mil.
FFB production rose 42.9% y-o-y, supported by improved yields from primeage palms and lower unit production costs, despite average CPO prices declining 2.8% y-o-y to RM3,372 per tonne.
TA Research said the group’s management expects FY27 Malaysian FFB production to remain broadly flat y-o-y, given ongoing replanting and the young mature palm profile.
Management expects Malaysian production to start recovering from October onwards following the seasonally low-yield period, it said, adding that nevertheless, the anticipated El Nino in the second half of FY27 remains a downside risk to production.
“We remain positive on CPO prices, supported by firm energy prices, Indonesia’s B50 mandate and stronger Indian festive demand.
“That said, seasonally stronger production and competitive soybean oil prices could cap the upside in the second half of 2026.
“We see El Nino as a more meaningful catalyst heading into 2027, given the usual lagged impact on palm oil production.”
TA Research has maintained “buy” on United Malacca with a lower target price of RM6.74 per share (previously RM7.03), based on 2027 price earnings ratio of 12 times and an environmental, social, and governance premium of 3%.
Kenanga Research said it was expecting further tightness in edible oil supply for the coming six to 12 months from a severe El Nino.
As such, elevated CPO prices is likely from even lower global edible oil inventory, it said, adding that demand stayed firm from good food as well as rising biodiesel demand.
Hence, Kenanga Research are raising United Malacca CPO prices from RM4,450 per tonne to RM4,700 for FY27 and from RM4,400 to RM4,500 for FY28, it said.
However, the research house said due to the weak 1Q27 harvest and expected negative impact on yields from a severe El Nino, it was cutting FY27 FFB harvest and raising fertiliser cost by 15% as its lower cost fertiliser inventory was probably depleted.
