Sarawak Oil Palms’ FY25 exceeds expectations on higher output

KUCHING (March 4): Sarawak Oil Palms Bhd (Sarawak Oil Palms) delivered a strong finish to financial year 2025 (FY25) with its fourth quarter core earnings growing by 27 per cent year on year (y-o-y) and 60 per cent quarter on quarter (q-o-q) to RM170 million, bringing the group’s FY25 core earnings to RM485 million, a 10 per cent y-o-y growth.

In a research report, analysts from Maybank Investment Bank Bhd (Maybank Research) guided that this had beaten both theirs and consensus estimates by 13 per cent and 9 per cent, respectively.

The robust 4Q results was largely due to higher fresh fruit bunch (FFB) output which grew by 13 per cent y-o-y on more favourable rainfall as well as higher palm kernel (PK) average selling prices (ASPs) of 6 per cent y-o-y. Though this was offset partially by lower palm oil product ASP of 11 per cent y-o-y.

For FY25, total FFB output had grown by three per cent y-o-y to 1.29 metric tonnes (MT) and Maybank Research reckons that Sarawak Oil Palms will be able to maintain another three per cent y-o-y growth in FY26.

“As for downstream, we understand it remained profitable in FY25. For FY26E, we expect Sarawak Oil Palms’ refining outlook to remain resilient as there are just six refineries in Sarawak with a total refining capacity of 3.1 million tonnes per annum compared to Sarawak’s annual crude pam oil (CPO) production of around 4.5mt,” said the research arm.

To reflect the positive variance and lower unit cost assumptions , Maybank Research fine tunes their FY26 and FY27 estimates core PATMI forecasts upwards by two per cent to RM444 million and RM472 million, respectively. They also introduce FY28 forecasts of a core PATMI of RM502 million.

Despite the higher forecasts, the research arm anticipates that Sarawak Oil Palms will see a 8.3 per cent y-o-y decline in its FY26 earnings per share (EPS) on lower CPO price assumptions.

Nevertheless, the analyst who maintains a ‘buy’ call on Sarawak Oil Palms assert that its current valuation remains attractive as it trades at 7.7-times its FY26 forecasted earnings and 0.8-times price-to-book value, with a net dividend of 3.9 per cent.

Following their EPS upgrade, they realise their target price (TP) to RM5.47 from RM5.37 on an unchanged 11-times FY26 price-to-earnings ratio (PER), in-line with its 10-year mean.

Additionally, Sarawak Oil Palms remains in a net cash position of approximately RM1.2 billion, equivalent to about 35 per cent of its market capitalisation or RM1.34 per share, providing room for potential dividend upside.

Maybank Research forecasts that Sarawak Oil Palms will propose at least four sen in its final FY25 dividend, bringing its FY25’s total dividend per share to 15 sen – implying a pay-out ratio of around 30 per cent.