Comprehensive Analysis of Malaysia’s Plantation Sector: February 2025 Outlook Broker Name: UOB Kay Hian Report Date: February 12, 2025 Overview of Malaysia’s Plantation Sector Malaysia’s plantation sector saw significant developments in January 2025, as highlighted by the Malaysian Palm Oil Board (MPOB) data. Lower palm oil end stocks, reduced production, and weaker exports contributed to a positive outlook for crude palm oil (CPO) prices. Despite a cautious tone toward the longevity of the CPO price rally, a few key players are expected to benefit from the current market dynamics. This analysis dives deep into the performance and outlook of several plantation companies. Hap Seng Plantations: A Top Pick for 2025 The report identifies Hap Seng Plantations (HAPL) as the top pick in the Malaysian plantation sector. The company benefits from its pure upstream exposure, favorable production trends, and high dividend yields. Its position as a domestic market seller allows it to enjoy better CPO average selling prices (ASPs). Recommendation: BUY Share Price: RM1.99 Target Price: RM2.35 Key Highlights: Projected 4Q2024 earnings of RM57 million, a 31% quarter-on-quarter (qoq) increase. Steady fresh fruit bunch (FFB) production growth trajectory expected in 2025. Target price based on 11x 2025 forecasted price-earnings (PE) ratio, -1 standard deviation to its five-year mean. Genting Plantations: A Moderate Performer Genting Plantations reported weaker performance compared to its peers. While its earnings are expected to grow by 10% qoq to RM79 million in 4Q2024, the company remains a HOLD recommendation due to higher valuation multiples and moderate dividend yields. Recommendation: HOLD Share Price: RM5.67 Target Price: RM6.08 Key Metrics: 2023 PE: 16.4x 2024F PE: 18.7x Dividend Yield: 2.7% IOI Corporation: Stable Yet Uninspiring IOI Corporation’s performance remains steady, but its high PE ratios and relatively lower dividend yield make it less attractive. The company is recommended as a HOLD. Recommendation: HOLD Share Price: RM3.75 Target Price: RM3.80 Key Metrics: 2023 PE: 15.9x 2024F PE: 22.0x Dividend Yield: 3.1% KL Kepong: A High-Valuation Play KL Kepong (KLK) is another HOLD recommendation. While the company has a strong market position, its high valuation multiples and moderate dividend yield constrain its attractiveness. Recommendation: HOLD Share Price: RM20.22 Target Price: RM22.20 Key Metrics: 2023 PE: 23.1x 2024F PE: 19.2x Dividend Yield: 2.6% Kim Loong: Attractive Dividend Play Kim Loong offers an attractive dividend yield of 6.9%, making it a favorable choice for income investors. However, its HOLD recommendation reflects limited upside potential in terms of share price appreciation. Recommendation: HOLD Share Price: RM2.35 Target Price: RM2.30 Key Metrics: 2023 PE: 13.8x 2024F PE: 15.7x Dividend Yield: 6.9% SD Guthrie: Promising Growth Ahead SD Guthrie is another standout performer with a BUY recommendation. The company’s diverse operations and positive earnings outlook make it a compelling choice, despite relatively high valuation multiples. Recommendation: BUY Share Price: RM4.80 Target Price: RM5.45 Key Metrics: 2023 PE: 40.3x 2024F PE: 22.5x Dividend Yield: 2.6% Sarawak Oil Palms: A Value Play Sarawak Oil Palms offers a combination of attractive valuation and moderate growth potential. While not a BUY recommendation, its HOLD status reflects its solid fundamentals. Recommendation: HOLD Share Price: RM3.11 Target Price: RM3.70 Key Metrics: 2023 PE: 9.3x 2024F PE: 6.8x Dividend Yield: 2.9%
