SDG (5285): Value Unlocking Strategy Justifies Premium, RHB Says BUY
Summary (TL;DR):
- Research Firm: RHB Investment Bank
- Subject: SDG / SDG (5285)
- Core Rating: BUY
- Target Price / Top Picks: MYR 5.45
- One-Liner: RHB believes SD Guthrie’s value-unlocking strategy warrants a premium valuation, as contributions from its new business verticals are yet to be fully priced in.
Report at a Glance
RHB Investment Bank released its latest research report on SDG on 2025-07-09, maintaining a “BUY“ rating with a target price of MYR 5.45. The core thesis of the report is that SD Guthrie’s value-unlocking strategy, which includes new business verticals, deserves a premium valuation, despite expected volatility in CPO prices due to geopolitical risks.
Investment Thesis (The Bull Case)
- Point 1: SD Guthrie’s value-unlocking strategy is expected to drive future earnings and deserves a premium valuation, as the earnings contribution from its new business verticals has yet to be fully priced into the stock.
- Point 2: Fundamentally, global supply and demand for the 17 oils and fats complex are anticipated to be more balanced in 2026F, driven by partial recovery in palm, sunflower, and rapeseed supplies, alongside continued growth from soybeans.
- Point 3: CPO prices are expected to continue trading at a discount to Soybean Oil (SBO) in the medium term, which should stimulate demand from price-sensitive countries such as India, Pakistan, and Bangladesh.
Potential Risks (The Bear Case)
- Risk 1: Adverse movements in Crude Palm Oil (CPO) prices pose a significant risk, particularly given their increased correlation with volatile crude oil prices due to geopolitical factors.
- Risk 2: Weather risks, including unexpected changes in weather patterns, could negatively impact Fresh Fruit Bunch (FFB) production output and overall agricultural yields.
- Risk 3: Unfavorable shifts in the global vegetable oil industry’s supply and demand dynamics could affect SD Guthrie’s market position and profitability.
Financial Forecast Summary
The analyst’s financial projections for the coming years are as follows:
| Fiscal Year (YE to December) | 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 Investment Bank research report)
Valuation & Target Price
| Rating | BUY |
| Last Close Price | MYR 4.81 |
| Target Price (TP) | MYR 5.45 |
| Valuation Methodology | The valuation is based on a Sum-of-Parts (SOP) approach, applying a 20x 2026F P/E to its plantation earnings, 18x P/E for its downstream division, and RNAV for its property landbank, with an additional 4% ESG premium. |
Analyst’s Conclusion
- Overall Stance: RHB maintains a “BUY” rating on SD Guthrie, confident that its strategic value-unlocking initiatives and diversified business pillars will drive long-term growth and justify its premium valuation, despite near-term CPO price volatility.
- Key Catalyst/Strength: The primary catalyst is the company’s ongoing value-unlocking strategy, with expected earnings contributions from new verticals that are not yet fully reflected in the current share price.
- Major Headwind/Risk: The most significant headwind remains the volatility of CPO prices, heavily influenced by unpredictable geopolitical risks and the broader dynamics of the global vegetable oil market.
- What to Watch: Investors should monitor global geopolitical developments for their impact on CPO prices, the evolving supply and demand balance within the 17 oils and fats complex, and the execution and financial contributions from SD Guthrie’s new business pillars.
Disclaimer: This article is a summary and interpretation of a research report published by RHB 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.
