Hap Seng Plantations Holdings Bhd - Outlook supported by Stronger Harvest, Better Yield
Fri, 29-May-2026 07:30 am
by Research Team • Apex Research

Counter

HSPLANT (5138)

Target Price (RM)

2.80

Recommendation

Buy

  • Fertiliser prices mostly contained with a 5-10% increase YoY.

  • FY26 FFB guidance of 715k maintained with stronger output from June to peak in Sept-Oct. Maintain FFB assumption of 704k for FY26 supported by better weather in 1HCY26 vs last year.

  • Replanting schedule of 1k ha in FY26. Estimated full replanting cost at RM40k/ha over three years from felling to maturity. CPO unit costs expected to reduce to RM2,223 (RM2,477: FY25) based on higher output.

  • Greater dividend visibility due to strong cash position and favourable price and volume outlook.

  • Maintain our BUY recommendation with a target price of RM2.80, based on 12.5x P/E multiple pegged to FY27F EPS.

Fertiliser prices mostly contained. For FY26 fertiliser costs are expected to be mostly insulated from geopolitical risks with 1HFY26 and 2HFY26 use being secured at Sept-CY25 and March-CY26 respectively. Overall, management expects FY26 fertiliser costs to rise 5-10% YoY which is in line with our own expectations. 

 

FFB guidance maintained. Management has maintained its FY26 FFB target of 715k MT. Production seasonality is expected to mirror last year’s pattern, with stronger output from June and peak production in Sept-Oct. We retain our FFB assumption of 704k which we believe will be supported by improving weather conditions versus the previous year, which was affected by excessive rainfall from La Niña. While El Nino probabilities have risen for 2HCY26, we believe that FFB yields should still improve YoY thanks to neutral weather conditions in 1HCY26.

 

Operational Highlight. Average tree age stands at c.17 years, largely due to a sizeable area planted around 20 years ago. To manage its ageing profile, the group will continue replanting c.1k ha in FY26 (1,030 ha: FY25), representing c.3% of mature hectarage. Full replanting cost from felling to maturity is estimated at RM40k/ha over three years, or c.RM13k/ha per year. CPO unit costs are budgeted at RM2,223 (RM2,477: FY25) with a reduction expected mainly due to higher expected CPO volumes arising from better FFB production.

 

Dividend policy. HSPLANT currently guides a dividend policy of 60% with a disclaimer of potential changes from time to time. With a favourable CPO price outlook, improving FFB production YoY and a strong cash position of RM665m (MM deposits + cash & cash equivalents), we believe that conditions are supportive for dividend yield visibility.

 

Outlook. We remain optimistic on HSPLANT’s FY26/FY27 outlook, underpinned by resilient CPO prices, improving FFB production, and contained fertiliser cost pressures. Consequently, our assumed dividend yield of 5-6% for FY26 is supported by said factors alongside a strong cash position of RM665m. We believe these factors support our BUY call, although delivery of peak-season FFB production remains the key near-term monitor.

 

Valuation. We maintain our BUY call for HSPLANT with a target price of RM2.80, by pegging 12.5x P/E multiple to FY27F EPS alongside a 0% ESG factored premium/discount based on a three-star ESG rating. We believe this is justified by HSPLANT’s pure upstream exposure, strong net cash position and improving dividend visibility.

 

Risk. EU export ban and regulations, changing weather patterns affect FFB production, shortage of labours and rising operational cost, increased competition from alternative vegetable oils

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