Johor Plantations Group (JPG), Sarawak Oil Palms, IOI Corp, London Sumatra Indonesia (LSIP), SD Guthrie (SDG), First Resources: Plantation Sector Report on Steady Gains and Neutral Outlook
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hoe.lee.leng@rhbgroup.com
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iftaar.hakim.rusli@rhbgroup.com
research.sg.equity@rhbgroup.com
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rhb.id.research@rhbgroup.com
Key Highlights
- Top Picks: Johor Plantations Group (JPG), Sarawak Oil Palms, IOI Corp, London Sumatra Indonesia (LSIP), SD Guthrie (SDG), and First Resources. We expect 2Q25F results to be largely in line, as stronger output would be offset by moderating CPO prices. In Malaysia, PO output grew MoM, pushing PO inventory to 2.11m tonnes in July, bringing the stock/usage ratio to above the historical average. PO output should continue ramping up towards the peak season, with demand also improving, as CPO prices are currently at a large discount vis-à-vis its competitors. Maintain NEUTRAL.
- 2Q25F earnings to marginally weaken QoQ, mainly due to moderating CPO prices. Malaysia spot CPO prices fell 14% QoQ (MYR4,074/tonne), while PK prices slid 6% QoQ to MYR3,403/tonne. However, this was partially offset by improving FFB output as we had a mini peak in May. For companies under our coverage, FFB output improved c.17.5% QoQ. We estimate Indonesia planters’ 2Q25 FFB output for stocks under our coverage rose 2.4% QoQ (based on seasonal trends) while CPO prices – nett of taxes – fell 11% QoQ.
- YoY, planters should see higher earnings in 2Q25F. In Malaysia, YoY output trends improved 5% for stocks under our coverage, while CPO and PK prices increased 1% and 40% respectively. In Indonesia, we estimate output was flattish YoY, while CPO prices (nett of taxes) declined 4% YoY and PK prices rose 13% YoY. This is in line with figures from the Indonesia Palm Oil Association (GAPKI) in YTD-May 2025, with a marginal 2% output increase.
- Overall, we expect 2Q25F to see seven companies record largely in-line earnings, based on our estimates of FFB production levels and moderating CPO prices; with two companies beating expectations (Astra Agro Lestari (AALI) and SDG) and three likely coming in below (JPG, TSH Resources and Ta Ann). We note that three planters have already released their results (LSIP, AALI and SDG).
- For Indonesian planters with downstream operations, we expect margins to weaken QoQ from a narrower tax differential between upstream and downstream products of USD80/tonne (-20% QoQ). YoY however, we expect margins to improve as tax differential widened +47% YoY from USD54 in 2Q24. Malaysian downstream players could see stronger QoQ and weaker YoY margins given the competition from Indonesia.
- In Malaysia, PO stock rose 4% MoM to 2.11m tonnes, on higher output (+7% MoM), offset by the higher exports (+4% MoM). We expect output to continue ramping up towards the peak season, while demand should also improve, as CPO prices are now at a large discount vis-à-vis its competitors. Going forward, we expect stock levels to continue picking up as production moves towards peak output, staying above the 2m-tonne mark.
- Keep NEUTRAL, as in our view fundamentals are more balanced now in 2026F – with edible oil supply expected to recover while demand should remain supportive. We believe CPO prices will taper off in 3Q25, before picking up in 4Q25. Our CPO price assumption is MYR4,100/tonne for 2025. YTD-2025 prices are now at MYR4,341/tonne.
Chart Description: FFB output growth – 2Q25F and FY YTD
The bar chart shows the Fresh Fruit Bunch (FFB) output growth for various plantation companies for the second quarter of 2025 (2Q25) and fiscal year-to-date (FY YTD). Most companies show positive growth in 2Q25, with notable performers like JPG and IOI. However, some companies like TSH show negative growth. The FY YTD figures are generally lower than the 2Q25 growth rates.
Company Data & Ratings
| Company Name | Rating | Target | % Upside (Downside) | P/E (x) Dec-26F | P/B (x) Dec-26F | ROAE (%) Dec-26F | Yield (%) Dec-26F |
|---|---|---|---|---|---|---|---|
| Astra Agro Lestari | Neutral | IDR6,990 | (2.6) | 9.9 | 0.6 | 5.7 | 4.8 |
| Bumitama Agri | Neutral | SGD0.80 | (4.9) | 8.7 | 1.2 | 13.8 | 7.2 |
| First Resources | Buy | SGD1.70 | 8.3 | 8.8 | 1.2 | 14.1 | 5.7 |
| Golden Agri-Resources | Neutral | SGD0.25 | (4.2) | 9.1 | 0.5 | – | 2.2 |
| IOI Corp | Buy | MYR4.30 | 14.9 | 17.2 | 1.7 | 10.4 | 2.8 |
| Johor Plantations Group | Buy | MYR1.45 | 10.9 | 12.2 | 1.1 | 8.7 | 3.8 |
| Kuala Lumpur Kepong | Neutral | MYR20.65 | 6.3 | 19.6 | 2.3 | 7.4 | 2.6 |
| PP London Sumatra Indonesia | Buy | IDR1,550 | 12.3 | 6.1 | 0.6 | 9.8 | 6.0 |
| Sarawak Oil Palms | Buy | MYR3.80 | 10.6 | 6.3 | 0.7 | 11.1 | 3.5 |
| SD Guthrie | Buy | MYR6.10 | 24.2 | 20.2 | 1.7 | 8.4 | 2.4 |
| Ta Ann | Neutral | MYR3.60 | (8.0) | 9.9 | 0.9 | 9.1 | 7.7 |
| TSH Resources | Neutral | MYR1.10 | (3.2) | 11.1 | 0.7 | 6.5 | 1.8 |
| Wilmar International | Neutral | SGD2.80 | (5.7) | 11.1 | 0.7 | 6.4 | 5.4 |
Market & Production Analysis
Figure 1: 2Q25F earnings review/preview based on FFB output
| FYE | 2Q25 | YoY | QoQ | FY YTD | RHB 2QCY25 Results preview/review comments |
|---|---|---|---|---|---|
| KLK | Sep | 12.1% | 14.6% | 2.9% | Earnings should be largely in line, based on FFB output |
| JPG | Dec | -5.6% | 25.0% | -7.8% | Earnings could be below expectations, based on FFB output |
| IOI | Jun | 14.1% | 27.8% | 1.3% | Earnings should be largely in line, based on FFB output |
| SDG | Dec | 4.2% | 14.0% | 2.7% | Earnings came in above expectations |
| SOP | Dec | 3.4% | 4.6% | 2.6% | Earnings should be largely in line, based on FFB output |
| TSH | Dec | 0.0% | 3.5% | 0.4% | Earnings could be slightly below expectations, based on FFB output |
| TAH | Dec | -1.9% | 7.7% | 2.4% | Earnings could be slightly below expectations, based on FFB output |
| FR* | Dec | -4.4% | -5.0% | 3.5% | No visibility for 2Q25, but based on output trends, earnings could be within expectations based on FFB output trend |
| GGR* | Dec | 0.1% | 5.0% | 6.2% | No visibility for 2Q25, but based on output trends, earnings could be largely in line based on FFB output trend |
| BAL* | Dec | 5.8% | 5.0% | 3.8% | No visibility for 2Q25, but based on output trends, earnings could be largely in line based on FFB output trend |
| AALI | Dec | 3.2% | 16.0% | 2.9% | Earnings came in above estimates |
| LSIP | Dec | -5.6% | 1.2% | -1.8% | Earnings came in largely in line |
Monthly Statistics
| (‘000 tonnes) | Jul-24 | Aug-24 | Sep-24 | Oct-24 | Nov-24 | Dec-24 | Jan-25 | Feb-25 | Mar-25 | Apr-25 | May-25 | Jun-25 | Jul-25 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Opening stocks | 1,833 | 1,754 | 1,883 | 2,012 | 1,885 | 1,836 | 1,709 | 1,580 | 1,510 | 1,563 | 1,866 | 1,983 | 2,032 |
| Imports | 10 | 10 | 10 | 10 | 10 | 10 | 67 | 67 | 122 | 90 | 67 | 67 | 61 |
| Production | 1,841 | 1,894 | 1,822 | 1,797 | 1,621 | 1,487 | 1,240 | 1,188 | 1,487 | 1,486 | 1,772 | 1,692 | 1,812 |
| Total supply | 3,683 | 3,658 | 3,715 | 3,825 | 3,529 | 3,332 | 3,037 | 2,835 | 3,019 | 3,307 | 3,707 | 3,745 | 3,905 |
| Exports | 1,670 | 1,500 | 1,500 | 1,640 | 1,590 | 1,470 | 1,197 | 990 | 1,000 | 1,300 | 1,407 | 1,261 | 1,309 |
| Domestic use | 259 | 266 | 199 | 203 | 310 | 260 | 260 | 329 | 450 | 427 | 317 | 453 | 483 |
| Total off take | 1,928 | 1,775 | 1,699 | 1,940 | 1,692 | 1,653 | 1,457 | 1,326 | 1,456 | 1,441 | 1,724 | 1,714 | 1,792 |
| End-month stocks | 1,754 | 1,883 | 2,012 | 1,885 | 1,836 | 1,709 | 1,580 | 1,510 | 1,563 | 1,866 | 1,983 | 2,032 | 2,113 |
Sector Commentary
Jul 2025 production improved 7% MoM (-1.6% YoY), bringing YTD-Jul 2025 output growth to +0.6% YoY. The MoM increase was mainly driven by West Malaysia (+14.4%), albeit offset by Sabah (-4.5%) and Sarawak (-1.7%). On the other hand, the YoY decline was due to Sarawak (-15.1%), while West Malaysia and Sabah showed slight improvements, at +2.6% YoY and +0.7% YoY respectively. For Indonesia, data from GAPKI showed CPO output improving +2.2% YoY in YTD-May 2025. Moving forward for Malaysia, we expect production to continue improving as we head towards a second mini peak in 3Q25.
Malaysian exports marginally improved +3.8% MoM (-23% YoY) in Jul 2025, bringing YTD-Jul 2025 export growth to -10% YoY. The MoM increase was driven by attractive CPO prices, as it traded at a discount of USD222 per tonne on average to soybean oil (SBO) and USD178 per tonne to sunflower oil (SFO) in July 2025 (vs USD188 per tonne in June 2025 to SBO and USD218 to SFO). We expect CPO to continue trading at a discount to SBO in the medium term, as SBO prices should remain supported at higher levels, on the back of anticipated demand coming from US biofuel policies. As such, we believe that CPO exports will continue picking up in the coming months, given the attractive prices. CPO is currently trading at a slightly narrower discount to SBO and SFO, of USD207 and USD170 per tonne, respectively.
Inventory levels at importing countries likely improved at end-Jul 2025. While Malaysian Palm Oil Council (MPOC) stock levels for Jul 2025 are not available yet, with CPO trading at a discount to other oils throughout Jul 2025, we believe restocking activities in importing countries continued. As at end-Jun 2025, India’s PO stock is at 17% below average (vs -29% in May); Bangladesh’s at 24% below average (vs -42% in May) and China’s at 18% below average (vs -42% in May). However, we highlight that buying activities would still likely lean towards Indonesia PO, given the more advantageous tax structure (at 18% vs Malaysia’s 10%). This is evident through Indonesia’s YTD-May 2025 export of +3.4% YoY vs Malaysia’s YTD-Jul 2025 of -10%.
Malaysia’s Jul 2025 inventory levels rose to 2.11m tonnes (+4% MoM and +21% YoY), from 1.75m tonnes, driven by higher output, but partially offset by higher exports. With this, Jul 2025 annualised stock/usage ratio is at 10.75%, above the 15-year historical average of 10%. Going forward, we expect stock levels to continue picking up as production moves towards peak output, staying above the 2m-tonne mark.
Figure & Chart Descriptions
Figure 3: CPO inventory was at 2.11m tonnes in Jul 2025 (+20.5% YoY from 1.75m tonnes in Jul 2024). This chart shows a historical view of CPO inventory levels (in tonnes) and CPO prices (in MYR). The inventory levels for July 2025 reached 2.11m tonnes, marking a significant increase from the previous year.
Figure 4: Malaysia’s CPO production (+0.6% YoY in YTD-Jul 2025). This line chart compares monthly CPO production across several years (2020-2025). The 2025 production line shows a seasonal increase towards the middle of the year, tracking slightly above the 2024 line in recent months.
Figure 5: Malaysia’s monthly palm oil exports (-10.1% YoY in YTD-Jul 2025). This line chart shows that 2025 export levels are generally lower than the previous two years, contributing to the year-to-date decline.
Figure 6: Indonesia’s Jul 2025 exports at +3.4% YoY. This line chart indicates that Indonesia’s exports in 2025 are performing better than in 2024, showing a positive year-over-year growth trend.
Figure 7 & 8: China’s and India’s palm oil stocks improved but remain below historical average. Both line charts show that while palm oil stock levels in China and India have recovered from recent lows as of June/July 2025, they are still below the historical averages for this time of year.
Figure 9 & 10: China’s and India’s PO imports trend. The bar charts indicate that China’s PO imports have seen a slight recovery in YTD-Jun 2025, while India’s edible oil imports have decreased, with a notable drop in its PO imports.
Figure 11 & 12: CPO price discount to other oils. These charts show CPO trading at a significant discount to both sunflower oil (USD170/tonne) and soybean oil (USD207/tonne), which supports export demand.
Figure 13: Gasoil-CPO price gap. The line chart indicates the price spread between gasoil and CPO, which has slightly widened, influencing biodiesel profitability.
Figure 14: Biodiesel production in Indonesia. The bar chart shows a steady year-over-year increase in both production and distribution of biodiesel in Indonesia, with a +6% YoY growth in production for 2024.
Risks
The main downside risks to our outlook include:
- Trade war;
- Significant changes in the crude oil price trend, which may result in changes in biodiesel mandates;
- Weather abnormalities resulting in an oversupply or undersupply of vegetable oils;
- Significant changes in the demand for vegetable oils, caused by changes in economic cycles or price dynamics;
- Worsening labour situation in Malaysia causing production to be affected negatively;
- Revision in Indonesia’s tax structure and trade policies;
- More ESG issues being pinpointed for listed companies.
Pricing and Company Details
Figure 17: Sensitivity of company earnings to changes in CPO prices
| Company | Net profit change for every MYR100/tonne change |
|---|---|
| Kuala Lumpur Kepong (KLK) (MYR) | 6-8% |
| IOI Corp (IOI) (MYR) | 4-6% |
| SD Guthrie (SDG) (MYR) | 7-9% |
| Sarawak Oil Palms (SOP) (MYR) | 10-12% |
| Ta Ann (TAH) (MYR) | 12-15% |
| Johor Plantations Group (JPG) (MYR) | 6-7% |
| TSH Resources (TSH) (MYR) | 7-8% |
| Golden Agri (GGR) (SGD) | 8-10% |
| First Resources (FR) (SGD) | 6-8% |
| Bumitama Agri (BAL) (SGD) | 7-9% |
| Astra Agro Lestari (AALI) (IDR) | 9-11% |
| London Sumatra (LSIP) (IDR) | 11-12% |
Figure 18: Labour shortage among Malaysian planters
| Company | Shortage (end-1Q25) | Comments |
|---|---|---|
| SDG | Fully staffed | |
| IOI | Fully staffed | |
| KLK | Fully staffed | |
| SOP | <4% | Management has been focusing on training existing workers, and note that labour is no longer a concern |
| TAH | Fully staffed | Helped by contract workers |
Figure 19: Regional companies’ forward sales positions (as at end-1Q25)
| Company | Forward sales for 2025 |
|---|---|
| KLK | 10% of Malaysian production three months ahead |
| IOI | 70% of production, sold on an average of two months forward |
| SDG | It has sold about 12% of its May-Dec Peninsular output at MYR4,200/tonne |
| SOP | None |
| TAH | None |
| FR | No quantum given, but continues to hedge 2-4 weeks ahead |
| BAL | None |
| GGR | 1-2 months of production, 3-6 months forward |
| LSIP | Minimal to none |
| AALI | Minimal |
Figure 21: Regional peer comparison
| Company | BBG ticker | Market cap (USDm) | Rating | Price (local ccy) | TP (local ccy) | Core P/E FY25F | Core P/E FY26F | P/BV FY25F | Net gearing FY25F | Div yield FY25F | ROE FY25F | EV/ha USD |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Kuala Lumpur Kepong | KLK MK | 5,095 | Neutral | 19.42 | 20.65 | 18.3 | 19.7 | 2.4 | 54.4% | 2.6% | 8.3% | 27,484 |
| Sarawak Oil Palms | SOP MK | 725 | Buy | 3.44 | 3.80 | 5.9 | 6.3 | 0.7 | Cash | 3.8% | 13.0% | 6,012 |
| IOI Corp | IOI MK | 5,466 | Buy | 3.74 | 4.30 | 18.4 | 17.4 | 1.9 | 14.2% | 2.7% | 10.5% | 34,122 |
| SD Guthrie | SDG MK | 7,999 | Buy | 4.91 | 6.10 | 18.7 | 20.2 | 1.7 | 18.1% | 2.2% | 9.5% | 16,581 |
| Ta Ann | TAH MK | 406 | Neutral | 3.91 | 3.60 | 9.7 | 9.9 | 0.9 | Cash | 8.2% | 9.6% | 7,618 |
| TSH Resources | TSH MK | 349 | Neutral | 1.14 | 1.10 | 10.0 | 11.1 | 0.7 | Cash | 1.8% | 7.6% | 9,494 |
| Johor Plantations | JPG MK | 719 | Buy | 1.31 | 1.45 | 11.8 | 12.2 | 1.1 | 41.1% | 4.2% | 9.6% | 17,843 |
| Wilmar | WIL SP | 14,426 | Neutral | 2.97 | 2.80 | 12.2 | 11.1 | 0.7 | 110.6% | 5.1% | 5.9% | N/A |
| Bumitama Agri | BAL SP | 1,133 | Neutral | 0.84 | 0.80 | 8.4 | 8.7 | 1.2 | 6.3% | 7.8% | 15.1% | 10,290 |
| Golden Agri | GGR SP | 2,566 | Neutral | 0.26 | 0.25 | 9.4 | 9.1 | 0.5 | 27.9% | 2.1% | 19.7% | 13,497 |
| First Resources | FR SP | 1,893 | Buy | 1.57 | 1.70 | 7.9 | 8.8 | 1.3 | 1.4% | 6.3% | 16.9% | 11,837 |
| PP London Sumatra | LSIP IJ | 578 | Buy | 1,380 | 1,550 | 5.8 | 6.1 | 0.6 | Cash | 5.5% | 11.7% | 1,985 |
| Astra Agro Lestari | AALI IJ | 848 | Neutral | 7,175 | 6,990 | 9.4 | 9.9 | 0.6 | Cash | 3.8% | 6.1% | 3,041 |
| Regional Average | 11.2 | 11.6 | 1.1 | 10,920 |
Figure 22: Breakdown of plantation companies’ landbanks
Peninsular Malaysia
- FGV: 59%
- GENP: 12%
- IOIC: 25%
- KLK: 27%
- SPDL: 38%
Sabah
- FGV: 31%
- GENP: 29%
- IJMP: 41%
- IOIC: 59%
- KLK: 16%
- SPDL: 8%
- TSH: 15%
Sarawak
- FGV: 8%
- IOIC: 5%
- SOP: 100%
- SPDL: 7%
Sumatra
- IJMP: 13%
- KLK: 26%
- SPDL: 12%
- TSH: 11%
- BAL: 1%
- FR: 73%
- GGR: 43%
- AALI: 36%
- LSIP: 78%
Kalimantan
- FGV: 2%
- GENP: 59%
- IJMP: 46%
- IOIC: 11%
- KLK: 27%
- SPDL: 21%
- TSH: 75%
- BAL: 99%
- FR: 27%
- GGR: 54%
- AALI: 46%
- LSIP: 17%
- SSMS: 100%
Sulawesi
- SPDL: 1%
- AALI: 18%
- LSIP: 5%
Papua
- GGR: 3%
Papua New Guinea
- SPDL: 13%
Investment Research Disclaimers
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