SDG (5285): Value Unlocking Poised to Drive Future Growth
Summary (TL;DR):
- Research Firm: RHB-OSK Investment Bank
- Subject: SDG / SD Guthrie (5285)
- Core Rating: BUY
- Target Price / Top Picks: MYR 5.45
- One-Liner: SD Guthrie’s strategic value-unlocking initiatives are expected to drive future earnings growth, justifying its premium valuation despite a moderated CPO price outlook.
Report at a Glance
RHB-OSK Investment Bank released its latest research report on SD Guthrie on 2025-07-09, maintaining a “BUY“ rating with a target price of MYR 5.45. The core thesis of the report is that while the broader plantation sector faces more balanced fundamentals and geopolitical volatility, SD Guthrie’s unique value-unlocking strategy positions it for sustained earnings contribution from new business verticals, which are not yet fully reflected in its current valuation.
Investment Thesis (The Bull Case)
- Point 1: SD Guthrie’s value-unlocking strategy is a key differentiator, with new earnings streams from these initiatives expected to provide a growth impetus not yet fully priced into the stock.
- Point 2: The company boasts strong ESG credentials, evidenced by a significant 21% decrease in GHG emissions intensity in 2024 and the recent lifting of the US Customs and Border Protection’s (CBP) two-year ban on its palm products, previously imposed due to forced labor allegations.
- Point 3 / Key Beneficiaries: SD Guthrie is highlighted as a “situational play” Top Pick. Other companies identified as “value plays” and Top Picks include Johor Plantations Group (JPG), Sarawak Oil Palms (SOP), IOI Corp (IOI), and London Sumatra Indonesia (LSIP), while First Resources (FR) is noted as another “situational play.”
Potential Risks (The Bear Case)
- Risk 1: Intensifying geopolitical risks globally could lead to increased volatility in CPO prices and impact the broader sector.
- Risk 2: Significant shifts in crude oil price trends could alter global biodiesel mandates, affecting demand and pricing for palm oil.
- Risk 3: Adverse weather abnormalities (e.g., El Niño/La Niña) could result in an oversupply or undersupply of vegetable oils, impacting CPO prices and production volumes.
Financial Forecast Summary
The analyst’s financial projections for the coming years are as follows:
| Fiscal Year (YE to Dec) | FY25F | FY26F | FY27F |
|---|---|---|---|
| Revenue (RM mil) | 16,026 | 16,796 | 18,196 |
| Net Profit (RM mil) | 1,491 | 1,462 | 1,505 |
| EPS (sen) | 22 | 21 | 22 |
| DPS (sen) | 11 | 12 | 12 |
| Dividend Yield (%) | 2.3 | 2.5 | 2.5 |
| P/E Ratio (x) | 22.32 | 22.75 | 22.10 |
(Source: RHB-OSK Investment Bank research report)
Valuation & Target Price
| Rating | BUY |
| Last Close Price | MYR 4.81 |
| Target Price (TP) | MYR 5.45 |
| Valuation Methodology | The target price is derived using a Sum-of-Parts (SOP) valuation, applying a 20x FY26F P/E to its plantation earnings, an 18x P/E for its downstream division, and a Revalued Net Asset Value (RNAV) for its property landbank. This methodology incorporates a 4% ESG premium. |
Analyst’s Conclusion
- Overall Stance: RHB-OSK maintains a “BUY” rating on SD Guthrie, confident in its long-term prospects driven by strategic value-unlocking initiatives despite a generally “NEUTRAL” outlook for the broader plantation sector.
- Key Catalyst/Strength: The company’s ongoing value-unlocking strategy, coupled with a strong commitment to ESG principles (evidenced by improved ESG scores and the lifting of the US CBP ban), are expected to be primary drivers of future performance.
- Major Headwind/Risk: The most significant risks include persistent geopolitical instability, which can lead to unpredictable CPO price movements, and potential changes in global biofuel policies (e.g., Indonesia’s B50 mandate) that could impact demand and supply dynamics.
- What to Watch: Investors should monitor the progress and impact of SD Guthrie’s new business verticals, global CPO price trends, developments in international biofuel policies, and the overall supply-demand balance of the 17 oils and fats complex.
Disclaimer: This article is a summary and interpretation of a research report published by RHB-OSK Investment Bank on 2025-07-09. All information is for reference purposes only and does not constitute investment advice. Investors should conduct their own independent research and due diligence and assume all associated risks.
