Sarawak Plantation Bhd - A Steady Start
Thu, 22-May-2025 07:28 am
by Steven Chong • Apex Research

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SWKPLNT (5135)

Target Price (RM)

2.30

Recommendation

Hold

  • SPLB reported 1QFY25 CNP of RM 18.5m (+126.9% yoy and -33.2% qoq), which was within expectations, accounting for 22%/23% of ours and consensus forecasts respectively.

  • FFB and CPO production remain on track, with output expected to accelerate in 2H25 as the Group enters its peak harvesting season. 

  • We re-iterate our HOLD call with a target price of RM2.30, based on 7.6x P/E multiple pegged to FY25 EPS of 30 sen.

 

Results within expectations. The Group reported a 1QFY25 CNP of RM18.5m, came in within expectations, accounting for 22% and 23% of our and consensus full-year estimates, respectively. Our CNP figure is derived after excluding gain from fair value adjustments of biological assets of RM4.1m.

 

YoY. 1QFY25 core CNP surged +126.9% yoy, lifted by stronger operating margin in tandem with the higher realised CPO price. Plantation operation’s GP grew +118.6% yoy thanks to the higher CPO ASP (+21.3% yoy). Conversely, the milling segment’s GP declined -15.7% yoy, impacted by weaker processing margins due to elevated input costs. Revenue grew +6.4% yoy to RM135.5m, though the increase was modest, mainly due to reduced activity in the milling operations.

 

QoQ. CNP dropped -33.2% qoq due to a seasonal decline in FFB production by -16.6% qoq which in turn weighed on overall sales volume for both CPO (-4.4% qoq) and PK (-10.8% qoq). In line with the softer volumes, quarterly revenue also fell by -5.6% qoq.

 

Outlook. During the quarter, harvestable hectarage declined to 19.7k ha (from 21.2k ha in 4QFY24, due to aggressive replanting programs for old palm areas. Nevertheless, the Group expects increasing yields from young mature areas may mitigate the impact. Meanwhile, FFB intake under milling operation is expected to be resilient at 660k MT as the group continues to maintain high utilisation rate. Both FFB and CPO output remain on track, having achieved 20% of our full-year targets of 400k mt and 116k mt, respectively. We expect production to pick up the pace in 2H25 as the Group transitions out of the wet season and enters its peak harvesting period.

 

Earnings Revision. We make no changes to our earnings forecasts, as our CPO price assumptions remain intact at RM4,300/mt.

 

Valuation. Re-iterate our HOLD recommendation on SPLB with a target price of RM2.30, by pegging 7.6x forward P/E multiple to FY25F EPS of 30 sen and 0% ESG factored premium/discount based on three-star ESG rating.

 

Risk. Export ban and regulations, changing weather patterns affect FFB production, taxation and export ban in Indonesia threatens local CPO demand, shortage of labours and rising operational cost.

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