| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent research report from TA SECURITIES highlights a stronger-than-expected first quarter of fiscal year 2026 (IQFY26) results, driven primarily by elevated fresh fruit bunch (FFB) production and improved operational margins. The company’s core net profit for the quarter surged impressively by 80.6% year-on-year to RM35.1 million, with both Malaysian and Indonesian operations contributing to the robust performance. The reported net profit saw an even larger increase of 184.1% year-on-year, reaching RM37.8 million.
Performance Review
FFB production saw a significant 18.9% year-on-year increase, totaling 135.3k tonnes for IQFY26. This growth was underpinned by higher yields from Sabah estates and robust contributions from prime-age palms in Indonesia. Margins were bolstered by strong palm kernel (PK) prices. In Malaysia, while average crude palm oil (CPO) prices remained stable at RM4,001 per tonne, average PK prices soared by 30.5% year-on-year to RM3,151 per tonne. Similarly, in Indonesia, despite a 3.2% year-on-year decline in average CPO prices to RM3,470 per tonne, this was effectively offset by a substantial 41.2% year-on-year rise in PK prices to RM3,048 per tonne. The investment bank has upgraded its FY26 and FY27 earnings estimates by 50.3% and 31.4% respectively, incorporating these stronger margins and higher FFB production growth. An initial FY28 earnings forecast of RM91.5 million has also been introduced.
Future Outlook and Investment View
Management anticipates continued growth in FFB production for FY26, attributing this to an optimal age profile of its oil palm trees and ongoing operational efficiency improvements. As an upstream pure-play, the company’s financial performance remains highly sensitive to global palm oil prices, FFB output, and production costs. TA SECURITIES maintains a cautious stance on CPO prices, anticipating pressure from ample South American soybean supply. However, demand from the biofuel sector is expected to provide some supportive counter-balance. Market volatility is projected to persist due to potential weather anomalies and shifts in trade policy, particularly concerning China-U.S. tariffs, which could impact CPO competitiveness and global demand for vegetable oils.
Following the strong performance and positive outlook, TA SECURITIES has upgraded its recommendation to BUY from Hold, setting a revised target price of RM6.29, an increase of 16.5% from the last traded price of RM5.40. This target price is based on 12 times the calendar year 2026 EPS, with an additional 3% ESG premium.
