Latest news with #SDGuthrieBhd
The Star
4 days ago
- Business
- The Star
Sales tax may pressure planters' competitiveness
PETALING JAYA: The competitiveness of the local palm oil industry will likely be eroded by the implementation of the expanded sales and service tax in July, analysts say. The tax will increase raw material costs, although some of the additional cost may be passed on to buyers, says CIMB Research. Major listed plantation companies with palm oil operations in Malaysia include SD Guthrie Bhd , FGV Holdings Bhd , Kuala Lumpur Kepong Bhd , IOI Corp Bhd and Wilmar International Ltd. 'Overall, we are slightly negative on the indicative 5% sales tax on crude palm kernel oil for Malaysian palm oil players, although the industry may seek a government waiver if the tax undermines local competitiveness against Indonesia,' said CIMB Research in a report yesterday. The research house said it understands from the Malaysian Palm Oil Association and planters that fresh fruit bunches (FFB) will be exempted from the 5% sales tax, despite being listed among taxable goods. 'This is because the sales tax applies only to the manufacturing sector, and FFB is classified as a locally harvested raw material intended for further processing rather than a manufactured product,' CIMB Research said. However, palm kernel oil, refined, bleached and deodorised palm kernel oil and palm kernel shell have been reclassified from tax-exempt goods to those subject to a 5% sales tax under the Sales Tax Order 2025. It remains unclear whether the industry will seek exemptions for these products, added the research house. Meanwhile, CIMB Research said the US Environmental Protection Agency's (EPA) proposal for 5.61 billion gallons of biodiesel under a mandate for next year is supportive of demand for edible oil and crude palm oil (CPO) prices, as the mandate will help sustain US consumption of edible oils. 'We maintain our CPO price forecast of RM4,200 per tonne for this year and reiterate our sector top picks, IOI and Hap Seng Plantations Holdings Bhd ,' said the research house. For next year, the EPA has set a target of 7.12 billion biomass-based diesel renewable identification numbers (RINs), which is expected to translate into 5.61 billion gallons of actual biodiesel blended that year. 'This target is expressed in RINs, in line with the EPA's broader objective to limit the number of RINs generated from imported biofuels,' CIMB Research said. As a result, the EPA now projects that each gallon of biomass-based diesel will generate 1.27 RINs in 2026 and 1.28 RINs in 2027, down from the previous estimate of 1.6 RINs. In comparison, the 2025 biomass-based diesel volume mandate stood at just 3.35 billion gallons, a level widely criticised by the industry as inadequate. Notably, the 2026 blending target of 5.61 billion gallons for biomass-based diesel volume exceeds the 5.25 billion gallons requested by the industry. 'We are positive on the proposed 2026 mandate, as fulfilling the 5.61 billion gallons or 19.2 million tonnes of biodiesel would support the use of edible oils as feedstock to meet the US biodiesel requirement. For context, US biodiesel production last year stood at around 16 million tonnes.' The final rule for the Renewable Fuel Standard (RFS) targets in the United States is expected to be published by the end of this year. Under the RFS, oil refiners are required to either blend substantial volumes of biofuels into the US fuel supply or purchase compliance credits known as RINs from others who exceed their blending obligations. Small refiners may apply for exemptions if they can demonstrate that complying with the mandate would cause undue economic hardship. The proposal reflects a significant shift in biomass-based diesel requirements, noted CIMB Research.
The Star
11-06-2025
- Business
- The Star
CPO prices to remain under short-term pressure
PETALING JAYA: Analysts expect crude palm oil (CPO) prices to remain under pressure in the mid to short-term given the rising inventory and higher output trends. The latest Malaysian Palm Oil Board's palm oil statistics for May revealed that palm oil stocks surged to 1.99 million tonnes, up 6.6% month-on-month and 13.5% year-on-year. Production for the month under review also hit an eight-month high at 1.77 million tonnes. Hong Leong Investment Bank Research (HLIB Research) in a report said the palm oil stock level will likely remain near the two million tonne mark this month. 'This is as seasonally higher crop yields and subdued festive-driven demand are expected to be offset by potentially stronger demand from India, following its recent decision to reduce the import duty on CPO to 10% from 20%,' the research house added. HLIB Research, which is 'neutral' on the sector given the absence of clear demand catalyst, said, 'We maintain our 2025 to 2026 CPO price assumptions of RM4,000 per tonne and RM3,800 per tonne, respectively, with the view that continued output recovery particularly from Indonesia will continue to cap palm oil prices over the near-to-medium term.' For exposure, the research house's top picks are SD Guthrie Bhd with a target price of RM5.17, Johor Plantations Group Bhd at RM1.35 and IOI Corp Bhd at RM4.24. Meanwhile, RHB Research is still 'overweight' on the sector with planters' earnings likely to continue to grow this year, on higher CPO and palm kernel prices. The research house firm said it made no changes to its recommendations after the reporting season for the first quarter of this year (1Q25) as the earnings results were mostly within expectations. RHB Research noted 11 planters under its coverage turning earnings in line with forecasts, while three underperformed. Its top picks within the sector include Johor Plantations, Sarawak Oil Palms Bhd , Bumitama Agri Ltd, PP London Sumatra Indonesia and SD Guthrie Bhd. In Malaysia, RHB Research expects palm oil output should continue ramping up towards the peak season, while demand should also improve, as 'CPO prices are currently within historical discounts versus its competitors'. MIDF Research said in a note to clients: 'We anticipate that the CPO prices will remain stabilised, hovering within the range of RM3,900 to RM4,200 per tonne. 'This is typically in line with seasonal production trends, as the pollination period ends in March and palm oil output is expected to recover – potentially leading to an increase in closing stock levels.' The research house said that the sector's top-line will continue to rise for the first half of this year, in line with higher average CPO price assumptions. 'However, margins are likely to remain under pressure due to the persistent elevated cost of production, caused by the higher locked in fertiliser costs from the second half of last year, coupled with elevated external fresh fruit bunch (FFB) purchase expenses amid low mills utilisation rates,' it added. MIDF Research has maintained a 'neutral' call on the sector at this juncture. While the CPO prices are expected to remain under pressure, it expects production is likely to perform, leading to a ceteris paribus performance for 2025. 'Therefore, we foresee only a handful of players likely to benefit from elevated CPO prices. 'Hence, we recommend avoiding smaller players with significant exposure to external FFB purchases as these factors could risk their CPO production, particularly during the current biological tree rest environment,' the research house noted. Instead, MIDF Research suggested focusing on larger players such as IOI with a target price of RM4.42, SD Guthrie at RM5.43 and Genting Plantations Bhd at RM6.10, whose CPO procurement, which are over 50% from their own estates offers more stability in realising CPO prices. TA Research in a report said its CPO price forecast is unchanged at RM3,800 per tonne for this year. It reiterated a 'hold' call on SD Guthrie, Kuala Lumpur Kepong Bhd and Kim Loong Resources Bhd , while maintaining a 'buy' call on United Malacca Bhd and TSH Resources Bhd .
The Star
10-06-2025
- Business
- The Star
Structural challenges likely for plantation sector
PETALING JAYA: The plantation sector lacks catalysts moving forward with the average crude palm oil (CPO) price forecasts pegged at RM4,100 per tonne for 2025 and RM4,000 per tonne for 2026, respectively. Phillip Capital Research, which initiated a 'neutral' rating on the sector, said the overall aggregate sector earnings is forecast to grow by 9.2% year-on-year (y-o-y) in 2025, before facing a 3.4% y-o-y earnings contraction in 2026 due to weaker palm product prices in the second half of 2025 (2H25) and persistent structural challenges. The research house said its preferred large-cap pick is SD Guthrie Bhd with a target price of RM5.21, supported by resilient upstream contributions, strategic diversification into non-food downstream segments and embedded value from potential asset monetisation. Furthermore, SD Guthrie's integrated structure and estate rejuvenation efforts positioned it well to weather CPO price swings while unlocking hidden land bank value over time. Among small-cap names, Phillip Capital Research said it favoured Sarawak Plantations Bhd with a target price of RM2.88, underpinned by its young estate profile, ongoing replanting programme and steadily improving internal crops production. The plantation group also boasts a healthy balance sheet and offers an attractive 4% dividend yield, supported by healthy free cash flows. Sarawak Plantations' compelling enterprise value (EV) per ha valuation of less than RM20,000 per ha presented notable upside potential versus its peers, the reseach house added. While macro headwinds such as softer CPO prices and global trade uncertainties persisted, Phillip Capital Research highlighted that valuations for selected planters are beginning to look attractive, particularly if prices stabilise and earnings recovery takes shape in 2H25. The potential rerating catalysts for the sector include tighter global edible oil supply, supportive biodiesel mandates and renewed foreign interest in undervalued mid to large-cap names. 'In our view, the plantation sector's risk-reward is now more balanced. 'We recommend selectively accumulating upstream-focused names with younger estates, improving fresh fruit bunch yields, and efficient cost structures to capitalise on any palm oil price recovery,' it noted. For investors seeking more stability, diversified integrated players with defensive earnings and consistent payouts warranted consideration. Overall, the research house viewed its valuations on the sector as fair, but structural headwinds would cap upside.
New Straits Times
08-05-2025
- Business
- New Straits Times
SD Guthrie's Q1 earnings meet expectations; HLIB ups forecasts on normalisation outlook
KUALA LUMPUR: SD Guthrie Bhd's earnings in the first quarter ended March 31, 2025 (Q1 2025) came in within research firms' expectations, as its earnings are expected to normalise in coming quarters due to lower crude palm oil (CPO) prices. Hong Leong Investment Bank Bhd (HLIB) raised its earnings forecasts for the company by 4.8 per cent, 6.4 per cent and 4.5 per cent for financial years 2025 (FY25), FY26 and FY27, respectively. The higher forecasts reflect higher pre-tax earnings margin assumptions for SD Guthrie at the downstream segment and the recalibration of the earnings model. It also remained optimistic on the company achieving fresh fruit bunch (FFB) output growth for FY25, driven primarily by sustained recovery in Indonesia and Papua New Guinea. "That said, uncertainties persist over the pace of recovery for Malaysia due to continued adverse weather conditions," said the firm. HLIB maintained a 'Buy' call on the stock with a higher target price (TP) of RM5.17. SD Guthrie's net profit in Q1 2025 more than doubled to RM550 million, boosted mainly by marginally higher FFB output, higher realised palm product prices, and lower finance costs. In a separate note, RHB Investment Bank Bhd (RHB Research) also considered SD Guthrie's earnings to be in line with its expectations in light of the moderating CPO prices. It noted output should improve in the coming quarter ahead of the peak output season in the second half of 2025. "We still like SD Guthrie for its new earnings catalyst, coming from land monetisation and the renewables segment," it said. It added that SD Guthrie's downstream margin slipped to 1.8 per cent in quarter-on-quarter, mainly due to weaker profits at its bulk segment as a result of margin compression and lower demand. "While SD Guthrie expects margins to recover in the coming quarters, we choose to remain wary and trim our FY25-27 margin assumption accordingly." The firm maintained 'Buy' on SD Guthrie with a TP of RM5.65. Meanwhile, CIMB Securities maintained its earnings forecasts for SD Guthrie, which took into account weaker earnings in the upcoming quarters. It said that the CPO price for July delivery on the Bursa Derivatives market is currently trading at RM3,754 per tonne, which is about 17 per cent lower than the RM4,576 per tonne achieved by SD Guthrie in Q1 2025. Given the lack of near-term catalysts, the firm downgraded its call on the stock to 'Hold' from 'Buy" with a lower TP of RM5.06 from RM5.50 previously. "We expect CPO prices to trend lower in Q2 2025 and Q3 2025 and are cautious that the recent US reciprocal tariffs could dampen demand for processed palm oil and delay land monetisation plans," it said.
The Star
07-05-2025
- Business
- The Star
SD Guthrie aims for key growth sectors
SD Guthrie group managing director Datuk Mohamad Helmy Othman Basha. PETALING JAYA: SD Guthrie Bhd is cautiously optimistic for the financial year ending Dec 31, 2025 (FY25), citing opportunities for downstream expansion and modest gains in fresh fruit bunch (FFB) production amid a challenging economic landscape. In a statement, group managing director Datuk Mohamad Helmy Othman said the group would continue to pursue opportunities in its new business pillars, particularly industrial park development and renewable energy. He highlighted a recent milestone in the industrial park segment, where SD Guthrie entered into a tripartite agreement for the development of 483.55ha of prime land in Bukit Pelandok, Negri Sembilan. 'While we remain cautious amid economic and geopolitical uncertainties, we are optimistic about the opportunities ahead. Our strategy continues to focus on enhancing operational excellence and capitalising on key growth sectors,' he said in a statement. SD Guthrie started the year with a jump in net profit to RM567mil or an earnings per share of 8.20 sen in the first quarter ended March 31, 2025 (1Q25). This was an increase from a net profit of RM211mil in the same quarter of the previous year. The group also posted a higher revenue of RM4.82bil in 1Q25, up by 10.94% year-on-year from RM4.34bil in 1Q24. The group attributed the earnings growth to a stronger performance from its upstream segment, which remains its core contributor. Profit before interest and tax (PBIT) for the upstream segment tripled to RM753mil in 1Q25 from RM255mil in the previous year, driven by higher average realised prices for crude palm oil (CPO) and palm kernel (PK), as well as improved FFB production. The group's realised CPO and PK prices averaged RM4,576 and RM3,342 per tonne respectively, a corresponding increase of 18% and 72%. The group's FFB production in Indonesia rose 11%, while operations in Papua New Guinea and the Solomon Islands recorded a 10% increase. It was noted that the gains helped cushion the 7% decline in production from the Malaysian operations. Conversely, the downstream segment reported a lower PBIT of RM76mil, down from RM121mil a year earlier. The decline was mainly due to weaker contributions from European refineries and Asia-Pacific bulk operations. 'However, the decline was mitigated by stronger profits from the Asia-Pacific differentiated operations, driven by improved sales volume and lower losses from joint ventures,' it added. Other business segments, namely renewables and other operations, had both reported losses. SD Guthrie chairman Tan Sri Nik Norzrul Thani Nik Hassan Thani acknowledged that the uncertain operating environment and continuing geopolitical tensions could present challenges for the group in the short and medium term. 'Despite this, I firmly believe the group has the necessary resilience and capability to face headwinds just as we had in the past, underscoring the wealth of experience and unwavering commitment of our management and employees,' he added.
