Broker: UOB Kay Hian
Date of Report: 12 August 2025
Malaysia Plantation Sector 2025: CPO Inventory Builds, Prices Range-Bound, Hap Seng Stands Out
Overview: Continued Inventory Build-Up Amid Higher Production
The Malaysian plantation sector continues to face a significant inventory build-up as of July 2025. According to the latest sector update, this is driven primarily by higher crude palm oil (CPO) production, even as exports show mixed performance month-on-month (mom) and year-on-year (yoy). Despite a rise in exports from June to July, the sector grapples with lackluster catalysts, and CPO prices are expected to remain range-bound into the third quarter. The broker maintains a MARKET WEIGHT stance on the sector, with a single BUY recommendation for Hap Seng Plantations (HAPL).
Key Sector Statistics: July 2025 Snapshot
| Metric |
Jul 24 |
Jun 25 |
Jul 25 |
mom % chg |
yoy % chg |
7M25 yoy % chg |
| CPO Production (m t) |
1.84 |
1.69 |
1.81 |
+7.1 |
-1.6 |
+0.5 |
| Palm Oil Domestic Use (m t) |
0.24 |
0.46 |
0.48 |
+4.5 |
+101.9 |
+20.3 |
| Palm Oil Exports (m t) |
1.69 |
1.26 |
1.31 |
+3.8 |
-22.5 |
-10.4 |
| Oleochemical (m t) |
0.27 |
0.20 |
0.25 |
+22.7 |
-7.8 |
-11.6 |
| Biodiesel (m t) |
0.01 |
0.00 |
0.05 |
+1662.0 |
+375.5 |
+18.3 |
| Palm Oil Imports (m t) |
0.01 |
0.07 |
0.06 |
-12.8 |
+482.3 |
+231.2 |
| Palm Oil Stocks (m t) |
1.75 |
2.03 |
2.11 |
+4.1 |
+20.5 |
+20.5 |
| CPO Price (RM/tonne) |
4,034 |
3,969 |
4,112.5 |
+3.6 |
+1.9 |
+8.4 |
Key Developments in July 2025
- Production: July’s CPO production reached 1.81 million tonnes, a 7.1% increase mom, though still down 1.6% yoy. The rise was attributed to more harvesting days, putting 7M25 output slightly higher by 0.5% yoy.
- Exports: Exports grew 3.8% mom but dropped 22.5% yoy to 1.31 million tonnes. For the first seven months of 2025, exports were down 10.4% yoy. China’s palm oil imports saw a sharp 32% decline, while India’s surged by 23% mom in July. However, India’s palm oil imports actually fell by 10% mom due to competitive pricing from soybean oil, leading to order cancellations.
- End-Stocks: Inventory built up to 2.11 million tonnes, up 4.1% mom and 20.5% yoy. The increase was a direct result of higher production outpacing export growth.
- Price Trends: The average CPO price for July was RM4,112.5/tonne, up 3.6% mom and 1.9% yoy. The 2025 forecast is RM4,200/tonne, with the MPOB price at RM4,218 and the BMD 3rd Month Contract at RM4,270 as of early August.
Sector Outlook: Neutral Stance Maintained
- UOB Kay Hian maintains a MARKET WEIGHT call, citing limited near-term catalysts and range-bound CPO prices expected through Q3 2025.
- Key Recommendation: Hap Seng Plantations (HAPL) is the sole BUY, favored for its attractive valuation, strong net-cash position, and high dividend yield.
Peer Comparison: Financial Metrics and Valuation Table
| Company |
Ticker |
Rating |
Price (RM) |
Target Price (RM) |
Market Cap (US\$m) |
PE 2024 (x) |
PE 2025F (x) |
PE 2026F (x) |
ROE (%) |
P/B (x) |
2025F Div (sen) |
2025F Div Yield (%) |
| Hap Seng Plantations |
HAPL MK |
BUY |
2.01 |
2.20 |
380 |
7.85 |
8.70 |
8.20 |
10.00 |
0.70 |
11.53 |
5.74 |
| SD Guthrie |
SDG MK |
HOLD |
4.92 |
4.75 |
8,043 |
21.87 |
20.59 |
22.47 |
8.30 |
1.70 |
15.35 |
3.12 |
| Genting Plantations |
GENP MK |
HOLD |
4.92 |
4.70 |
1,043 |
13.67 |
12.58 |
16.70 |
6.10 |
1.00 |
19.56 |
3.97 |
| IOI Corporation |
IOI MK |
HOLD |
3.75 |
3.60 |
5,499 |
22.02 |
18.02 |
17.89 |
9.50 |
9.50 |
10.81 |
2.88 |
| KL Kepong |
KLK MK |
HOLD |
19.58 |
20.50 |
5,155 |
18.58 |
18.37 |
16.19 |
4.20 |
1.60 |
53.28 |
2.72 |
| Kim Loong |
KIML MK |
HOLD |
2.28 |
2.25 |
529 |
15.20 |
11.87 |
10.13 |
18.30 |
2.40 |
16.32 |
7.16 |
| Sarawak Oil Palms |
SOP MK |
HOLD |
3.45 |
3.15 |
729 |
6.91 |
7.56 |
7.89 |
12.20 |
0.70 |
9.06 |
2.63 |
Detailed Company Highlights
Hap Seng Plantations (HAPL MK) – BUY
- Share Price: RM2.01
- Target Price: RM2.20
- Market Cap: US\$380m
- Valuation: Attractive PE at 8.7x for 2025F, lowest among peers. High forecast dividend yield at 5.74% for 2025F.
- Key Strengths: Inexpensive valuation, high net-cash position, and appealing dividend payout make it stand out amid sector headwinds.
SD Guthrie (SDG MK) – HOLD
- Share Price: RM4.92
- Target Price: RM4.75
- Market Cap: US\$8,043m
- Valuation: PE of 20.6x for 2025F, with a modest dividend yield of 3.12% for 2025F. ROE at 8.3%.
Genting Plantations (GENP MK) – HOLD
- Share Price: RM4.92
- Target Price: RM4.70
- Market Cap: US\$1,043m
- Valuation: 2025F PE at 12.58x, dividend yield at 3.97%. ROE at 6.1%.
IOI Corporation (IOI MK) – HOLD
- Share Price: RM3.75
- Target Price: RM3.60
- Market Cap: US\$5,499m
- Valuation: 2025F PE at 18.02x, dividend yield at 2.88%. High P/B at 9.5x, ROE at 9.5%.
KL Kepong (KLK MK) – HOLD
- Share Price: RM19.58
- Target Price: RM20.50
- Market Cap: US\$5,155m
- Valuation: 2025F PE at 18.37x, dividend yield at 2.72%. ROE at 4.2%.
Kim Loong (KIML MK) – HOLD
- Share Price: RM2.28
- Target Price: RM2.25
- Market Cap: US\$529m
- Valuation: 2025F PE at 11.87x, highest dividend yield among peers at 7.16%. ROE at 18.3%.
Sarawak Oil Palms (SOP MK) – HOLD
- Share Price: RM3.45
- Target Price: RM3.15
- Market Cap: US\$729m
- Valuation: 2025F PE at 7.56x, dividend yield at 2.63%. ROE at 12.2%.
August 2025 Outlook: What to Watch
- Production: Expected to remain robust, sustaining around 1.8m tonnes in August, consistent with Malaysia’s peak cycle in 2H.
- Exports: Export volumes anticipated to rise, with early surveys indicating a 23–24% mom increase for 1–10 August. August exports typically average 1.4m tonnes in previous years.
- End-Stocks: Inventories expected to stay above 2m tonnes, possibly increasing to 2.1–2.2m tonnes.
Regional CPO Production by State – July 2025
| State/Region |
Jul 24 (m t) |
Jun 25 (m t) |
Jul 25 (m t) |
mom % chg |
yoy % chg |
7M25 yoy % chg |
| Johor |
0.30 |
0.27 |
0.30 |
+10.5 |
-1.4 |
-3.2 |
| Pahang |
0.34 |
0.30 |
0.34 |
+15.7 |
+2.0 |
-1.8 |
| Perak |
0.20 |
0.18 |
0.21 |
+15.0 |
+4.8 |
+5.5 |
| Negeri Sembilan |
0.07 |
0.07 |
0.07 |
+11.8 |
+1.0 |
-2.6 |
| Selangor |
0.05 |
0.05 |
0.06 |
+16.6 |
+7.4 |
+7.0 |
| Terengganu |
0.05 |
0.04 |
0.05 |
+25.8 |
-2.0 |
-10.3 |
| Kelantan |
0.03 |
0.04 |
0.05 |
+14.4 |
+29.9 |
+4.3 |
| Kedah |
0.03 |
0.03 |
0.03 |
+19.9 |
+3.7 |
+4.3 |
| Other States |
0.02 |
0.02 |
0.02 |
+15.7 |
+7.4 |
-3.7 |
| Peninsular Malaysia |
1.10 |
0.99 |
1.13 |
+14.4 |
+2.6 |
-0.5 |
| Sabah |
0.34 |
0.36 |
0.35 |
-4.5 |
+0.7 |
+1.3 |
| Sarawak |
0.40 |
0.34 |
0.34 |
+0.7 |
-15.1 |
+3.7 |
| East Malaysia |
0.74 |
0.70 |
0.69 |
-2.0 |
-7.8 |
+2.5 |
Conclusion: Navigating a Range-Bound Sector
Malaysia’s plantation sector in 2025 is characterized by robust production, rising inventories, and a cautious price outlook. While most companies are rated HOLD due to valuation and structural headwinds, Hap Seng Plantations emerges as the top pick for its strong fundamentals and attractive yield. Investors should remain vigilant for shifts in export dynamics and potential catalysts as the sector navigates through its production peak and ongoing inventory challenges.
