MBSB Research maintains their Neutral call towards Sarawak Plantation Bhd with an unchanged target price of RM2.88.
“Its earnings outlooks remain stable, driven by expanding harvestable area of nearly about 1,500 ha, while cost of production is still in the downward trend despite the small bump seen in this quarter, due to fertilisers manuring strategy,” said MBSB.
Profitability was well supported by higher operating profit circa RM79 mil as margin inched up by +2.5 ppts due to decent mills purchasing strategy.
Earnings across the board were still decent, despite both subsegments recorded narrowed margins.
Estate operations registered RM25.6 mil as the increase in fresh, fruit bunch (FFB) selling price circa >RM800/Mt could not mitigate the weak FFB sale volume, while mills operations earnings fell to RM5.4 mil, on lower crude palm oil (CPO) production of 25,750 Mt despite higher average CPO and PK price realised, circa RM4,175/Mt and PK of RM3,189/Mt, respectively.
Operationally, FFB production was relatively down to 91,031 Mt, as delayed peak corps seasonality has impacted estate activity, due to biological issues that happens in quarter one financial year 2025 (1QFY25).
While CPO production continued to go down by -12.0% year-on-year, following reduced FFB processed.
This was due to lower FFB external purchased, as the management prioritised higher standard of crops during the elevated CPO prices traded.
As a result, this quarter saw a weaker FFB yield and slightly higher estimated all-in cost of production >RM2,500/Mt.
Nevertheless, estate and mill margins remained satisfactory. “We are retaining our earnings estimate as it aligns with baseline projection. Note that, SPB is purely local company and well insulated from Indonesia’s regulatory risk,” said MBSB. —Nov 24, 2025
Main image: Sop.com
