KUALA LUMPUR: Hong Leong Investment Bank (HLIB) has reiterated its ‘neutral’ outlook on Malaysia’s plantation sector, citing a lack of clear demand catalysts and uneven earnings prospects across both upstream and downstream segments.
In a research note issued today, the bank observed that most plantation players are expected to post solid year-on-year (y-o-y) earnings growth for the first quarter of 2025 (1Q25), buoyed by firm palm product prices. However, quarter-on-quarter (q-o-q) performance is anticipated to soften, weighed down by lower production and moderating prices.
“Production volumes were negatively impacted by seasonal cropping trends and heavy rainfall in parts of Malaysia,” HLIB said. “All planters under our coverage recorded negative fresh fruit bunch (FFB) output growth in the first quarter, ranging from -4.9% to -27.7%.”
In contrast, plantation activities in Indonesia fared better, underpinned by different cropping cycles and fewer weather-related disruptions.
On the downstream side, the research note highlighted continued earnings pressure due to Malaysia’s export tax regime, elevated input costs, and a narrowing price differential with Indonesian products, which has weakened export competitiveness.
Among the companies analysed, TSH Resources Bhd recorded the smallest q-o-q decline in FFB output at -4.9%, a performance HLIB attributed to a recovery in yields driven by improved cropping patterns in Indonesia and the resolution of a localised social dispute.
Hap Seng Plantations Bhd, meanwhile, experienced an 11.3% y-o-y drop in production, primarily due to flood-related disruptions in early 2025, though harvesting activities showed a recovery in March.
HLIB maintained its crude palm oil (CPO) price forecasts at RM4,000 per tonne for 2025 and RM3,800 per tonne for 2026, citing steady demand and supply fundamentals.
The bank’s top sector picks include SD Guthrie Bhd with a target price of RM5.17, Jaya Tiasa Holdings Bhd (RM1.35), and IOI Corporation Bhd (RM4.24).
-Bernama
