- Malaysia’s palm oil stock has been declining for five months, reaching 1.51 million tonnes in February 2025.
- The palm oil supply is expected to remain tight in March 2025 due to reduced labor productivity during the fasting month of Ramadan.
- Our top picks are Hap Seng Plantations, SD Guthrie, and Ta Ann Holdings.
Over the past five months, palm oil stocks have been steadily declining, reaching 1.51 million tonnes in February 2025. This drop is primarily due to lower crude palm oil (CPO) output and reduced imports. The situation is expected to remain tight in March 2025, largely because of reduced labor productivity during the fasting month of Ramadan, when Muslims fast from dawn to dusk.
As a result, CPO spot prices likely to stay supported at current levels, trading between RM4,500 and RM4,600 per tonne. However, despite the high CPO prices in the first quarter of 2025 (1Q2025), potential weakness is expected in the second quarter (2Q 2025), driven by recovering palm oil production, especially from Indonesia, and higher supply from competing vegetable oils.
For investors interested in agribusiness stocks listed on Bursa Malaysia, we favor Hap Seng Plantations Holdings Bhd (KLSE:5138), SD Guthrie Bhd (KLSE:5285), and Ta Ann Holdings Bhd (KLSE: 5012).
1. Hap Seng Plantations
- Financial Performance: In FY2024, Hap Seng Plantations reported a core net profit of RM161.4 million, a 61% year-on-year (YoY) increase. The strong performance in 4Q2024 was supported by a high CPO price of RM4,795 per tonne, along with higher CPO and palm kernel (PK) sales volume.
- Outlook: Hap Seng Plantations is expected to continue its strong performance in the first half (1H2025). The company’s higher-than-peer CPO average selling price (ASP) is anticipated to offset a lower quarter-on-quarter fresh fruit bunch production in 1Q2025.
For more info, read CGSI Note | Hap Seng Plantations | Feb 27, 2025
2. SD Guthrie
- Financial Performance: SD Guthrie’s FY2024 core net profit was at RM1,536 million, a 73% YoY increase. This was driven by strong upstream performance and better-than-expected downstream margins. Higher profits from its bulk and trading market segments were offset by lower volumes in the differentiated products segment.
- Outlook: The upstream segment earnings are expected to remain strong in 1H2025, supported by high CPO and PK prices. Additionally, production recovery in Indonesia operations is likely to benefit from good CPO prices. While downstream margins may remain soft for its differentiated products segment, stronger performance by its bulk segment in Europe is expected to offset this weakness.
For more info, read CGSI Note | SD Guthrie | Feb 27, 2025
3. Ta Ann Holdings
- Financial Performance: For FY2024, Ta Ann reported a net profit of RM183.64 million, up from RM157.25 million in FY2023. The 4Q2024 performance was affected by impairment losses from its Tasmanian mill and a drop in export logs and plywood products sales volume.
- Outlook: In its oil palm sector, the company said severe wet weather has led to widespread flooding in Sarawak, particularly affecting the peat estates. As a result, CPO production is expected to decline further, especially during this low crop period. However, global supply constraints caused by climate change are likely to push for CPO price growth.
Source: CGS International
Conclusion
We’re keeping a neutral stance on the sector because we expect CPO prices might dip in the second quarter of 2025. That said, we really like Hap Seng Plantations for consistently getting higher CPO prices than their peers over the past five years. SD Guthrie also stands out for its smart use of its large landbank, turning it into industrial parks and renewable energy projects. And Ta Ann is appealing because of its strong balance sheet and a solid expected dividend yield of 6.7% for FY2025.
Just keep in mind, there are some risks. Continued high soybean production can increase the supply of vegetable oils, which might lower palm oil prices. Additionally, ongoing trade disruptions from tariff wars, such as those between major economies like the US and China, can impact global trade flows and market stability, potentially affecting palm oil exports and prices.
Disclaimer: Hailey Chung, Manager of Content at ProsperUs, does not own shares of any companies mentioned.
