SWKPLNT: Solid Earnings Performance Driven by Production Gains and Cost Control
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates that the company concluded its financial year 2025 with a robust financial performance, reporting a record core net profit of RM90.8 million. This figure represents a significant 21.2% year-on-year increase and substantially surpassed both the research house’s and market consensus expectations, achieving 102% and 112% of full-year forecasts, respectively.
Performance Review
The strong financial results were primarily attributed to an increase in both Crude Palm Oil (CPO) and Fresh Fruit Bunch (FFB) production. Despite recording a lower CPO price, fourth-quarter FY25 revenue improved by 19% quarter-on-quarter and 15% year-on-year, driven by stronger FFB production. The company’s FFB production for 4QFY25 surged 26% year-on-year to 111,511 metric tonnes, contributing to a full-year total of 360,992 metric tonnes (+7% YoY). Additionally, FFB yield expanded from 15.91 mt/ha to 17.93 mt/ha, while the Oil Extraction Rate (OER) was marginally lower at 19.41%.
Core profit for the fourth quarter also advanced 11.4% year-on-year, propelled by disciplined cost management. Lower production costs, enhanced palm kernel credit, and the surge in FFB production were key factors. The all-in CPO production cost for 4QFY25 averaged RM2,500/mt, bringing the full-year average to RM2,700/mt.
Shareholders also saw improved returns, with a final dividend per share (DPS) of 5 sen declared for the quarter, bringing the full-year dividend to 25 sen, an increase from 20 sen in FY24.
Future Outlook
Looking ahead to FY26, the company plans strategic investments totalling RM65 million in capital expenditure. This includes RM47 million allocated for replanting 1,000 hectares and maintaining 8,000 hectares of immature area, with the remainder earmarked for equipment upgrades and new buildings. The replanting target for FY26 is more moderate compared to the aggressive 3,200 hectares replanted in FY25.
Management remains optimistic, targeting a strong 25% growth in FFB production for FY26. This growth is expected to contribute to a further decline in production costs by RM300/mt to approximately RM2,400/mt, driven by anticipated higher FFB yields and improved OER. The company also intends to aggressively expand its seed production unit, aiming for a 60% year-on-year increase to 2.5 million seeds per annum in FY26.
The report highlighted that the company’s bottom line is sensitive to CPO price fluctuations, with every RM100 change in CPO price impacting net profit by RM8 million.
Recommendation and Valuation
Public Investment Bank maintains its “Neutral” rating on the company, with an unchanged target price of RM3.51, based on 10x FY26 EPS. The current price stands at RM3.60.
