Sarawak Plantation profit buoyed by rising CPO prices
MIDF Research noted that estate operations remained resilient.
PETALING JAYA: Analysts remain cautiously optimistic on Sarawak Plantation Bhd (SPB), expecting stable near-term earnings supported by higher harvestable areas and firm crude palm oil (CPO) prices.
This was despite ongoing cost pressures and seasonal production challenges.
For the first quarter ended March 31, 2025 (1Q25), SPB reported a net profit of RM22.63mil, or earnings per share of 8.11 sen, up from RM19.07mil or 6.84 sen a year earlier. Revenue also increased to RM135.51mil from RM127.32mil in 1Q24.
According to MIDF Research, the group's performance was in line with expectations, with core profit after tax and minority interest coming in at RM18.5mil.
This was underpinned by higher average selling prices of CPO and palm kernel (PK), alongside an expansion in harvestable area.
'Overall earnings were better due to a higher average CPO selling price on top of the higher harvestable area of 1,500ha,' said MIDF Research.
The research house noted that estate operations remained resilient, contributing earnings of RM25.2mil. However, mill profitability fell by 30% year-on-year (y-o-y) to RM4.2mil, mainly due to a lower oil extraction rate (OER) of 19.05%.
The decline in OER was attributed to delays in the evacuation of fresh fruit bunch (FFB) following prolonged wet weather from mid-January to late February.
As for the production front, FFB output grew 6.1% y-o-y, with average CPO and PK selling prices rising to RM4,728 per tonne and RM3,451 per tonne, respectively.
Despite this, MIDF Research highlighted that production costs climbed to RM3,300 per tonne from RM2,900 a year earlier due to the revised minimum wage policy and a reduction in external FFB purchases.
The research house has maintained its 'neutral' call on SPB, with an unchanged target price of RM2.29, pegged to a forecast financial year 2025 earnings per share of 27 sen and a price-to-earnings ratio of 8.5 times.
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