Broker: UOB Kay Hian
Date of Report: 11 July 2025
Malaysia Plantation Sector Update: CPO Stocks Rise as Exports Weaken, Key Stocks in Focus
Overview: Sector Faces Rangebound CPO Prices Amid Inventory Build-Up
The Malaysian plantation sector is witnessing a continued build-up in palm oil end-stocks, primarily due to softer exports despite a sequential dip in production. According to the latest industry data, crude palm oil (CPO) prices are expected to trend within a narrow range in the near term, with few sector catalysts on the horizon. UOB Kay Hian maintains a MARKET WEIGHT stance on the sector, with a BUY recommendation reserved for only one standout stock.
Key Sector Data: June 2025 Snapshot
|
Jun 24 |
May 25 |
Jun 25 |
mom % chg |
yoy % chg |
1H25 yoy % chg |
| CPO Production (m tonne) |
1.62 |
1.77 |
1.69 |
-4.5 |
4.8 |
1.0 |
| Palm Oil Domestic Use |
0.34 |
0.31 |
0.46 |
49.6 |
34.5 |
10.5 |
| Palm Oil Exports |
1.21 |
1.41 |
1.26 |
-10.5 |
4.5 |
10.5 |
| Oleochemical |
0.22 |
0.23 |
0.20 |
-13.0 |
-6.2 |
-12.3 |
| Biodiesel |
0.01 |
0.03 |
0.00 |
-91.5 |
-80.8 |
-5.1 |
| Palm Oil Imports |
0.01 |
0.07 |
0.07 |
1.5 |
496.5 |
213.8 |
| Palm Oil Stocks |
1.83 |
1.99 |
2.03 |
2.0 |
10.9 |
10.9 |
| CPO Price (RM/tonne) |
3,957.50 |
3,880.50 |
3,969.00 |
2.3 |
0.3 |
9.5 |
Production and Exports: Mixed Trends Drive Inventory Growth
- Production: June 2025 output hit 1.69m tonnes, down 4.5% month-on-month but up 4.8% year-on-year. Second quarter production grew 35% quarter-on-quarter and 7% year-on-year, mainly fueled by robust output in April, May, and June. The first half of 2025 saw a 1% year-on-year increase in output.
- Exports: Export volumes declined 10.5% month-on-month to 1.26m tonnes but were 4.5% higher year-on-year. Notably, exports to India fell by 15%, while China recorded a marginal 1% increase. Malaysia’s market share loss to Indonesia is a likely driver of the export slump.
- Inventories: End-stocks rose to 2.03m tonnes, up 2% from May and 10.9% year-on-year, reflecting the impact of weaker exports despite lower output.
Price Outlook: Rangebound CPO Prices Expected
- CPO prices in June 2025 averaged RM3,969/tonne, up 2.3% month-on-month and 0.3% year-on-year.
- 2024 CPO price: RM4,180/tonne (actual)
- 2025 forecast: RM4,200/tonne
- MPOB (9 July 2025): RM4,105.50/tonne
- Bursa Malaysia Derivatives 3rd Month Contract: RM4,190/tonne
Stock Picks and Peer Analysis
| Company |
Ticker |
Rec |
Price (RM) |
Target Price (RM) |
Market Cap (US\$m) |
2024 PE (x) |
2025F PE (x) |
2026F PE (x) |
ROE (%) |
P/B (x) |
2025F Div (sen) |
Div Yield (%) |
| Hap Seng Plantations |
HAPL MK |
BUY |
1.88 |
2.25 |
354.09 |
7.34 |
7.52 |
7.47 |
10.00 |
0.70 |
12.51 |
6.65 |
| SD Guthrie |
SDG MK |
HOLD |
4.76 |
4.75 |
7,753.26 |
21.16 |
19.92 |
21.74 |
8.30 |
1.70 |
15.35 |
3.22 |
| Genting Plantations |
GENP MK |
HOLD |
5.17 |
4.70 |
1,092.45 |
14.36 |
13.22 |
17.55 |
6.10 |
1.00 |
19.56 |
3.78 |
| IOI Corporation |
IOI MK |
HOLD |
3.85 |
3.60 |
5,625.38 |
22.61 |
18.50 |
18.36 |
9.50 |
9.50 |
10.81 |
2.81 |
| KL Kepong |
KLK MK |
HOLD |
20.84 |
20.50 |
5,466.26 |
19.78 |
19.56 |
17.23 |
4.20 |
1.60 |
53.28 |
2.56 |
| Kim Loong |
KIML MK |
HOLD |
2.26 |
2.25 |
522.92 |
15.07 |
11.77 |
10.04 |
18.30 |
2.40 |
16.32 |
7.22 |
| Sarawak Oil Palms |
SOP MK |
HOLD |
3.24 |
3.15 |
682.21 |
6.49 |
7.10 |
7.41 |
12.20 |
0.70 |
9.06 |
2.80 |
Stock Focus: Hap Seng Plantations (HAPL)
Recommendation: BUY Share Price: RM1.88 Target Price: RM2.25 Highlights:
- Inexpensive valuations with a high net-cash position
- Strong production growth profile
- Attractive dividend yields (6.65%)
Outlook for July 2025 and Beyond
- Production: Expected to resume month-on-month growth as the peak season continues. Malaysia’s output typically peaks in the second half of the year at 1.8m-1.9m tonnes monthly.
- Exports: Projected to rebound, supported by improved price competitiveness versus other vegetable oils. Early June export surveys indicate a monthly increase in export volume.
- Inventories: End-stocks are likely to remain stable at around 2m tonnes as export growth is expected to match or outpace production.
India: Surging Palm Oil Imports and Tariff Cuts
- India’s palm oil imports soared by 84% month-on-month in May 2025, driven by low stocks and competitive pricing against soyoil and sunflower oil.
- June 2025 estimates suggest a further 20% rise in imports.
- Import duty on crude edible oils was reduced to 10%, effectively lowering the total import duty to 16.5% for crude palm oil, soyoil, and sunflower oil, bolstering demand further.
Risks Impacting the Plantation Sector
- ENSO Outlook: Weather risks are currently benign, with low probability of La Niña or El Niño events in late 2025.
- US Policies: Potential changes to regional trade tariffs or the US biodiesel programme under the Trump administration could significantly impact global vegetable oil markets.
- Macroeconomic Uncertainties: Risks include the pace of China’s economic recovery, possible slowdowns in developed markets, and continued geopolitical tensions in key oilseed-producing regions (Russia-Ukraine, Middle East), which could influence freight and input costs.
CPO Production by State: June 2025 Breakdown
| State |
Jun 24 |
May 25 |
Jun 25 |
mom % chg |
yoy % chg |
1H25 yoy % chg |
| Johor |
0.26 |
0.27 |
0.27 |
0.7 |
2.9 |
-5.0 |
| Pahang |
0.30 |
0.30 |
0.30 |
-2.2 |
0.0 |
-3.3 |
| Perak |
0.16 |
0.19 |
0.18 |
-3.0 |
9.3 |
4.8 |
| Negeri Sembilan |
0.07 |
0.07 |
0.07 |
1.1 |
0.0 |
-4.2 |
| Selangor |
0.05 |
0.05 |
0.05 |
-2.7 |
7.1 |
6.9 |
| Terengganu |
0.04 |
0.04 |
0.04 |
4.0 |
-2.9 |
-14.7 |
| Kelantan |
0.03 |
0.04 |
0.04 |
2.9 |
29.2 |
-7.8 |
| Kedah |
0.03 |
0.03 |
0.03 |
-11.4 |
0.2 |
5.5 |
| Other States |
0.02 |
0.02 |
0.02 |
-2.9 |
-4.0 |
-6.5 |
| Pen Malaysia |
0.95 |
1.00 |
0.99 |
-1.2 |
3.5 |
-2.3 |
| Sabah |
0.33 |
0.40 |
0.36 |
-9.8 |
11.1 |
-0.5 |
| Sarawak |
0.34 |
0.37 |
0.34 |
-9.6 |
0.0 |
9.5 |
| East Malaysia |
0.66 |
0.77 |
0.70 |
-9.7 |
5.5 |
4.2 |
Conclusion: Sector Remains Market Weight, HAPL Stands Out
With end-stocks rising and CPO prices likely to remain rangebound, the Malaysian plantation sector faces a period of consolidation. While most stocks are rated HOLD due to limited catalysts, Hap Seng Plantations emerges as a notable BUY, thanks to its strong fundamentals and attractive dividends. Investors should closely monitor export trends, policy changes, and weather developments, all of which could shift the sector’s outlook in the coming quarters.
