Broker: UOB Kay Hian
Date of Report: 11 June 2025
Malaysia Plantation Sector Update: CPO Inventory Builds as Production Climbs, Exports Remain Flat
Overview: Limited Catalysts Amid Inventory Build-Up
The Malaysian plantation sector continues to experience a build-up in crude palm oil (CPO) inventories, driven by higher production and subdued domestic demand. While exports have improved month-on-month, they remain largely unchanged year-on-year. With CPO prices expected to trade within a range in the near term and few sector catalysts on the horizon, UOB Kay Hian maintains a MARKET WEIGHT stance on the sector. The sole BUY recommendation is Hap Seng Plantations (HAPL), reflecting its attractive valuation and dividend yields.
Key Highlights from May 2025 MPOB Data
| Metric |
May 24 |
Apr 25 |
May 25 |
MoM % Chg |
YoY % Chg |
5M25 YoY % Chg |
| CPO Production (m tonne) |
1.70 |
1.69 |
1.77 |
+5.1 |
+3.9 |
+0.2 |
| Palm Oil Domestic Use |
0.33 |
0.34 |
0.33 |
-2.3 |
-1.5 |
+6.7 |
| Palm Oil Exports |
1.38 |
1.10 |
1.39 |
+25.6 |
+0.3 |
+6.7 |
| Oleochemical |
0.26 |
0.22 |
0.23 |
+6.0 |
-9.7 |
-13.4 |
| Biodiesel |
0.02 |
0.02 |
0.03 |
+39.3 |
+46.1 |
+2.6 |
| Palm Oil Imports |
0.02 |
0.06 |
0.07 |
+18.3 |
+232.2 |
+190.0 |
| Palm Oil Stocks |
1.75 |
1.87 |
1.99 |
+6.6 |
+13.5 |
+13.5 |
| CPO Price (RM/tonne) |
3,902.50 |
4,319.5 |
3,880.5 |
-10.2 |
-0.6 |
+11.3 |
- Production: May’s CPO output rose to 1.77m tonnes (+5.1% MoM, +3.9% YoY), aligning with internal forecasts but exceeding broader market expectations. Production growth in East Malaysia, particularly Sarawak (+9.5% YoY), offset a 2.3% decline in Peninsular Malaysia.
- Exports: Palm oil exports grew 25.6% MoM to 1.39m tonnes, slightly beating expectations, but YoY growth was flat (+0.3%). Export gains were led by surges to India (+42% MoM) and China (+53% MoM), though both remained lower than last year’s levels.
- End-Stocks: Inventories climbed to 1.99m tonnes (+6.6% MoM, +13.5% YoY), marginally below consensus. This was driven by higher production and soft domestic demand, with only marginal YoY improvement in exports.
- Prices: CPO spot prices fell 10.2% MoM to RM3,880.5/tonne, nearly flat YoY.
Sector Positioning: Market Weight Maintained
UOB Kay Hian holds a MARKET WEIGHT view on the Malaysian plantation sector. The near-term outlook is characterized by:
- Limited immediate catalysts for a price breakout.
- Expectations for CPO prices to remain range-bound through Q3 2025.
- A singular BUY recommendation for Hap Seng Plantations (HAPL), supported by its attractive valuations, strong net-cash position, robust production growth profile, and appealing dividend yield.
Stock Picks and Peer Comparison
| Company |
Ticker |
Rec |
Price (RM) |
Target (RM) |
Market Cap (US\$m) |
PE 2024 (x) |
PE 2025F (x) |
PE 2026F (x) |
ROE (%) |
P/B (x) |
2025F Div (sen) |
Yield (%) |
| Hap Seng Plantations |
HAPL MK |
BUY |
1.82 |
2.25 |
344.0 |
7.1 |
7.3 |
7.2 |
10.1 |
0.7 |
12.5 |
6.9 |
| SD Guthrie |
SDG MK |
HOLD |
4.60 |
5.00 |
7518.5 |
20.4 |
20.1 |
22.1 |
10.6 |
1.8 |
14.7 |
3.2 |
| Genting Plantations |
GENP MK |
HOLD |
4.96 |
4.70 |
1051.7 |
13.8 |
12.7 |
16.8 |
6.1 |
0.9 |
19.6 |
3.9 |
| IOI Corporation |
IOI MK |
HOLD |
3.65 |
3.55 |
5351.6 |
21.4 |
17.5 |
17.4 |
9.6 |
1.9 |
10.8 |
3.0 |
| KL Kepong |
KLK MK |
HOLD |
19.92 |
19.00 |
5243.0 |
18.9 |
17.8 |
16.5 |
4.2 |
1.5 |
55.9 |
2.8 |
| Kim Loong |
KIML MK |
HOLD |
2.20 |
2.25 |
510.8 |
14.7 |
11.5 |
9.8 |
18.5 |
2.4 |
16.3 |
7.4 |
| Sarawak Oil Palms |
SOP MK |
HOLD |
3.07 |
3.15 |
648.6 |
6.1 |
6.7 |
7.0 |
12.2 |
0.7 |
9.1 |
3.0 |
Crude Palm Oil (CPO) Price Assumptions and Trends
- Historic CPO Prices (RM/tonne):
- 2020: 2,686
- 2021: 4,408
- 2022: 5,088
- 2023: 3,810
- 2024: 4,180
- 2025F (Forecast): 4,200
- Recent Spot Prices:
- MPOB as of 6 June 2025: RM3,913.5/tonne
- BMD 3rd Month Contract: RM3,954/tonne
June and Q2 2025 Outlook
- Production: Output is expected to rise at a slower pace in June, as the current peak cycle moderates. Malaysia’s monthly production typically peaks in the second half, historically reaching 1.8–1.9m tonnes, close to May’s 1.77m tonnes.
- Exports: Export volumes are set to rise further in June, supported by improved price competitiveness for palm oil against other edible oils. Demand from China and India is surging, with India recently slashing its crude vegoil import tariff from 27.5% to 16.5%. Early June export surveys point to an 8–26% MoM increase.
- Inventory: End-stocks are projected to hold steady at around 2m tonnes as export growth is likely to outpace production growth.
- Q2 Earnings: Sector earnings are expected to weaken quarter-on-quarter due to a 20% decline in CPO spot prices since April (from RM4,700/tonne in Q1 to about RM3,900/tonne). However, this should be offset somewhat by higher production volumes and recovering downstream earnings, except for companies like Kuala Lumpur Kepong, which has seen disruptions in its Malaysian oleochemicals operations due to gas supply issues.
- Weather: Forecasts indicate light to moderate rainfall across major palm oil regions, supporting ongoing production recovery and facilitating harvest and fieldwork.
Regional Production Breakdown: May 2025
| Region/State |
May 24 |
Apr 25 |
May 25 |
MoM % Chg |
YoY % Chg |
5M25 YoY % Chg |
| Johor |
0.25 |
0.27 |
0.25 |
+5.7 |
-4.5 |
-5.0 |
| Pahang |
0.28 |
0.30 |
0.28 |
+6.6 |
-1.8 |
-3.3 |
| Perak |
0.18 |
0.19 |
0.18 |
+3.9 |
+7.5 |
+4.8 |
| Negeri Sembilan |
0.06 |
0.07 |
0.06 |
+12.2 |
+4.2 |
-4.2 |
| Selangor |
0.05 |
0.05 |
0.05 |
-0.9 |
+1.2 |
+6.9 |
| Terengganu |
0.04 |
0.04 |
0.04 |
+5.1 |
-11.5 |
-14.7 |
| Kelantan |
0.03 |
0.04 |
0.03 |
+10.8 |
+8.9 |
-7.8 |
| Kedah |
0.03 |
0.03 |
0.03 |
+3.3 |
+9.1 |
+5.5 |
| Other States |
0.02 |
0.02 |
0.02 |
+14.1 |
-0.2 |
-6.5 |
| Peninsular Malaysia |
0.94 |
1.00 |
0.94 |
+5.9 |
-0.1 |
-2.3 |
| Sabah |
0.38 |
0.40 |
0.38 |
+4.7 |
+13.0 |
-0.5 |
| Sarawak |
0.36 |
0.37 |
0.36 |
+3.2 |
+6.4 |
+9.5 |
| East Malaysia |
0.74 |
0.77 |
0.74 |
+3.9 |
+9.7 |
+4.2 |
India’s Palm Oil Imports Rebound
- India’s palm oil imports dropped sharply in April 2025, falling 24% MoM to 322,000 tonnes due to palm oil trading at a premium over soyoil. However, May 2025 saw a strong 42% MoM rebound, though still 24% lower YoY. The rebound was underpinned by palm oil regaining a price discount to soyoil and strategic restocking amid softer global prices.
Conclusion: A Sector in Balance, Watchful for Catalysts
The Malaysian plantation sector is poised for a steady, range-bound performance in the coming months. While inventories continue to build, a recovering export environment and favorable weather could provide some support. Investors should remain selective, with Hap Seng Plantations standing out for value, growth, and yield in a sector otherwise lacking near-term excitement. Integrated players may see mixed results in Q2, particularly in downstream operations, as raw material and energy cost dynamics evolve.
Contact Information
- Lester Siew, CFA | +603 2147 1990 | lestersiew@uobkayhian.com
- Anas Fitri Ahmad | +603 2147 1915 | anasfitri@uobkayhian.com
