Public Investment Bank neutral on plantation sector, CPO prices expected to remain stable in 2H25

Malaysian Reserve

3 days ago

PUBLIC Investment Bank Bhd has maintained a neutral outlook on the plantation sector, with crude palm oil (CPO) prices projected to remain stable in the second half of 2025 (2H25), trading within the RM4,000 to RM4,300 per tonne range.
The research house said in a note today that the forecast is supported by stabilised inventory after surpassing the 2 million tonne level, alongside improved export momentum driven by price competitiveness against soybean oil.
'At the point of writing, CPO futures are trading at RM4,330 per tonne. Export momentum, particularly to India, is expected to improve, driven by the wide palm oil-soybean oil price differential and low inventory in the country,' it said.
The investment bank said the full-year CPO price forecast has been maintained at RM4,200 per tonne.
'Our top picks are Sarawak Plantation and Ta Ann, both offering attractive dividend yields of five to six per cent,' it said.
Meanwhile, lower production costs are anticipated in 2H 2025, despite earlier pressure from higher minimum wages and fertiliser costs.
'Despite higher minimum wages and fertiliser prices in 1H 2025, we anticipate lower production costs in 2H 2025, aided by increased fresh fruit bunch yields and palm kernel credits,' it said.
It added that the implementation of the mandatory two per cent Employees Provident Fund contribution for foreign workers beginning October 2025 is expected to trim plantation labour costs by less than one per cent.
On the policy front, the bank noted that Indonesia's B40 biodiesel programme remains on track, which may support long-term demand for palm oil as a biofuel feedstock.
It also flagged environmental risks, noting a significant rise in fire hotspots in Sumatra and Kalimantan, which could lead to transboundary haze concerns if dry weather persists.
It also said subdued demand and price volatility continue to pressure Malaysia's oleochemical segment, especially for players reliant on palm kernel oil and export markets.
'Price volatility in palm kernel oil further complicates cost hedging, while the strengthening the ringgit negatively affects revenue. Affected players include SD Guthrie, KLK, and IOI Corp,' it said.
The research house added that the imposition of a 25 per cent tariff by the United States (US) on Malaysian palm oil products is unlikely to have a material impact.
'While this makes Malaysian products less competitive, the US accounts for less than three per cent of Malaysia's palm oil exports in 2024, limiting the impact,' it said.
In contrast, the US government's proposed expansion of biofuel mandates could drive up soybean oil prices, indirectly supporting the appeal of palm oil in global markets, it said. — BERNAMA