SWKPLNT: Operational Efficiencies and Production Recovery Propel Positive Outlook
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Despite facing softer year-on-year revenue in the third quarter and first nine months of 2025 due to weaker sales volume and production, a plantation company demonstrated resilient earnings. This performance was largely driven by firmer crude palm oil (CPO) and palm kernel (PK) prices, coupled with strategic tax savings from replanting activities. The company reported a record-high fresh fruit bunch (FFB) output of approximately 39,800 metric tonnes in October 2025, maintaining strong momentum with around 37,000 metric tonnes in November.
Performance Review and Cost Discipline
The company’s ability to maintain healthy earnings amidst a challenging revenue environment underscores effective cost management. While the 2025 FFB production target was adjusted downwards to between 355,000 and 363,000 metric tonnes from an initial 380,000 metric tonnes, management remains confident in its cost control strategies. Unit production cost per tonne is projected to modestly ease in 2026, falling to RM2,400-RM2,600/MT from RM2,700/MT in 2024. This anticipated reduction is attributed to a higher proportion of internally produced FFB, which helps dilute fixed costs, and continued selective third-party purchases to manage margins effectively.
Future Outlook and Growth Drivers
Looking ahead, the company is poised for a significant rebound in 2026, with FFB output projected to surge by 24-27% year-on-year to 450,000 metric tonnes. This optimistic forecast is bolstered by improving crop formation and the maturation of young palms. Analysts note that the ongoing production recovery observed in the fourth quarter of 2025, combined with enhanced cost visibility and improving fruit quality, are expected to underpin the company’s earnings trajectory in 2026.
Challenges and Investment Recommendation
While the outlook is largely positive, potential headwinds include production volatility, swings in palm product prices, inflationary pressures (such as increases in EPF contributions, labour expenses, and fertiliser prices), and regulatory uncertainties. Nevertheless, TA SECURITIES has issued a BUY recommendation for the company, setting a target price of RM0.25, which implies a potential upside of 25.0% from the last traded price of RM0.20.
