ESG – PLANTATION
EUDR to be delayed again?
Investment Highlights
In July 2025, the European Parliament driven mainly by right-wing party members backed a motion, which objects to the European Commission’s deforestation risk country list for EUDR. The lawmakers have proposed to delay the EUDR, which is scheduled to take effect on 30 December 2025. In addition, Austria and France have proposed a fourth risk classification i.e negligible risk. The current classifications are low risk, standard risk and high risk. Malaysia has been classified as standard risk. We maintain Neutral on the plantation sector with BUYS on Johor Plantations Group (TP: RM1.67/share), Kim Loong Resources (TP: RM2.75/share) and TSH Resources (TP: RM1.38/share).
- No delay for now. In spite of the European Parliament’s proposals, the European Commission has no obligation to act on the vote. The above development arose as the country risk classification has drawn the ire of some lawmakers. This is because it is not based on updated information and certain countries, which have significant deforestation activities, were classified as standard risk instead of high risk.
- Next FAO (Food and Agricultural Organisation of the United Nations) update is in March 2026. The last structural FAO data update from agricultural census took place in April 2025. The next dataset will be released in March 2026. This can be used to review the country risk classification for 2026F. Recall that Malaysia said that EU’s classification of standard risk was based on a 2020 UN FAO report, which is outdated.
- Mondelez wants EUDR to be delayed by a year but not others. Nestle, Danone and Ferrero would like EUDR to be implemented according to the schedule. An official with Mondelez said that more than a million farmers in Ivory Coast produce cocoa but less than 20% have EUDR-mandated traceability cards. The group also said that the cocoa sector is under pressure due to soaring prices and declining production. On the other hand, Nestle said that a delay in the EUDR would worsen legal uncertainties, increase operational costs and create confusion. A delay would also send a contradictory message to consumers as demand for transparency and sustainability are reaching unprecedented levels.
- We believe that the major palm producers are prepared for EUDR. As mentioned in a previous report, the large palm producers in Malaysia and Indonesia such as SD Guthrie and Golden Agri Resources are prepared for EUDR. Companies like SD Guthrie and KL Kepong have been sending trial shipments of EUDR-compliant palm products since last year. As for smallholders, who are not compliant, we believe that they can sell their products to other markets such as Turkey or Middle East instead of the EU.
EXHIBIT 1: VALUATION MATRIX
| Share price | EPS (sen) | PE (x) | Target price | Upside | Rec | |||
|---|---|---|---|---|---|---|---|---|
| (RM) | FY25F | FY26F | FY25F | FY26F | (RM) | |||
| IOI Corp | 3.86 | 20.3 | 21.4 | 19.0 | 18.0 | 4.05 | 4.9% | Hold |
| KLK | 19.80 | 77.9 | 112.9 | 25.4 | 17.5 | 20.50 | 3.5% | Hold |
| SD Guthrie | 4.86 | 26.4 | 27.2 | 18.4 | 17.9 | 4.89 | 0.6% | Hold |
| Johor Plantations | 1.24 | 10.9 | 11.1 | 11.4 | 11.2 | 1.67 | 34.4% | Buy |
| TSH Resources | 1.14 | 10.8 | 11.5 | 10.6 | 9.9 | 1.38 | 21.1% | Buy |
| Kim Loong | 2.35 | 17.2 | 17.5 | 13.7 | 13.4 | 2.75 | 17.0% | Buy |
Source: AmInvestment Bank
DISCLOSURE AND DISCLAIMER
This report is prepared for information purposes only and it is issued by AmInvestment Bank Berhad (“AmInvestment”) without regard to your individual financial circumstances and objectives. Nothing in this report shall constitute an offer to sell, warranty, representation, recommendation, legal, accounting or tax advice, solicitation or expression of views to influence any one to buy or sell any real estate, securities, stocks, foreign exchange, futures, investment or other products. AmInvestment recommends that you evaluate a particular investment or strategy based on your individual circumstances and objectives and/or seek financial, legal or other advice on the appropriateness of the particular investment or strategy.
The information in this report was obtained or derived from sources that AmInvestment believes are reliable and correct at the time of issue. While all reasonable care has been taken to ensure that the stated facts are accurate and views are fair and reasonable, AmInvestment has not independently verified the information and does not warrant or represent that they are accurate, adequate, complete or up-to-date and they should not be relied upon as such. All information included in this report constitute AmInvestment’s views as of this date and are subject to change without notice. Notwithstanding that, AmInvestment has no obligation to update its opinion or information in this report. Facts and views presented in this report may not reflect the views of or information known to other business units of AmInvestment’s affiliates and/or related corporations (collectively, “AmBank Group”).
This report is prepared for the clients of AmBank Group and it cannot be altered, copied, reproduced, distributed or republished for any purpose without AmInvestment’s prior written consent. AmInvestment, AmBank Group and its respective directors, officers, employees and agents (“Relevant Person”) accept no liability whatsoever for any direct, indirect or consequential losses, loss of profits and/or damages arising from the use or reliance of this report and/or further communications given in relation to this report. Any such responsibility is hereby expressly disclaimed.
AmInvestment is not acting as your advisor and does not owe you any fiduciary duties in connection with this report. The Relevant Person may provide services to any company and affiliates of such companies in or related to the securities or products and/or may trade or otherwise effect transactions for their own account or the accounts of their customers which may give rise to real or potential conflicts of interest.
This report is not directed to or intended for distribution or publication outside Malaysia. If you are outside Malaysia, you should have regard to the laws of the jurisdiction in which you are located.
If any provision of this disclosure and disclaimer is held to be invalid in whole or in part, such provision will be deemed not to form part of this disclosure and disclaimer. The validity and enforceability of the remainder of this disclosure and disclaimer will not be affected.