SOME cost inflation is expected for the plantation sector, but it should be contained. Effective 1 Oct 2025, mandatory Employees Provident Fund contributions of 2% from employers and 2% from non-Malaysian workers will nudge up the quarter four calendar year 2025 (4QCY25) cost by approximately 1%.
International fertiliser prices also rose by about 15% year-on-year (YoY) in 4QCY25 but flat quarter-on-quarter (QoQ).
However, as fertilisers are often bought six months ahead and MYR strengthened 2% QoQ and 6% YoY in 4QCY25, the impact of higher fertiliser price may only be felt later, in 1HCY26 and provided prices stay high then.
“Except for SDG and TSH, the Oct–Dec quarter’s harvest was the best for the other planters in the past 12 months,” said Kenanga.
Even so, SDG’s final quarter’s harvest was merely 1% softer QoQ and YoY while TSH harvest peaked in 3Q for 2025 due to flooding in 4Q.
On the other hand, HSPLANT’s 4QCY25 harvest surged 24% QoQ but its full-year’s financial year 2025 (FY25) fresh fruit bunch (FFB) production was still 5% compared to last year.
Reflecting the good 4QCY25 harvest, MPOB also reported the strongest production quarter in ten years over Oct-Dec CY25.
“To conclude, FFB production of individual planters were within Kenanga’s estimates except for TSH which came in 9% below; thus, our downgrade of its FY25F core net profit,” said Kenanga.
Kenanga maintains their Neutral call as earnings should stay healthy from softer but still firm crude palm oil prices and strong balance sheet. Players with more diverse earnings or growth are preferred.
Kenanga likes KLK for recovering FFB output, stronger property earnings and declining gearing ahead, PPB on improving food FMCG market; hence, better earnings outlook and amidst decade low valuations while TSH offers rare exposure into organic upstream growth over the coming 3-5 years. —Feb 4, 2025
Main image: WWF International
