Sarawak Plantation may lift final dividend as FY25 production surges

KUCHING (Feb 19): Sarawak Plantation Bhd (SPB) delivered its strongest quarterly performance in the fourth quarter of 2025 (4Q25), with fresh fruit bunch (FFB) production rising to 116,000 metric tonnes (MT) from 91,000 MT in 3Q25.

This lifted full-year 2025 production to 360,993 MT, up 6.9 per cent year-on-year.

Public Investment Bank Bhd (PublicInvest Research) in a note on Thursday said the robust production numbers, solid balance sheet and the likelihood of a higher dividend payout by its major shareholder, Ta Ann Holdings Bhd, could pave the way for stronger dividends at SPB.

Year-to-date, the group has declared dividends per share (DPS) of 20 sen.

“In our view, given the group’s net cash position of RM182 million and strong operating cash flow of more than RM120 million per annum, it could potentially declare another 5sen for the final quarter, bringing the full-year DPS to about 25sen.

“At a full-year DPS of 25 sen, this would translate into a dividend yield of 7.2 per cent, making SPB one of the highest dividend-yielding stocks in Malaysia,” it said.

Despite recording a moderate 6 per cent FFB production growth in FY25, PublicInvest Research said management is targeting strong double-digit growth in FY26.

This is expected to be driven by a normalised FFB yield of above 21 MT per hectare, compared with an estimated 17.9 MT per hectare in FY25, alongside favourable weather conditions in Sarawak.

January has already started on a positive note, with FFB production rising 17 per cent year-on-year.

On costs, management expects crude palm oil (CPO) production cost to ease from about RM2,700 per MT in FY25 to RM2,400 per MT in FY26F.

This will be supported by higher production volumes and an improved oil extraction rate (OER) of 19.7 per cent, compared with 19.4 per cent in FY25.

CPO production cost averaged around RM2,700 per MT in 2025, including palm kernel (PK) credit of about RM700 per MT. Costs in 4Q25 were lower at roughly RM2,500 per MT.

Looking ahead, unit production cost is projected to decline further to around RM2,200 per MT in 2027 on stronger output and improved operating efficiency.

Fertiliser application is expected to increase by more than 20 per cent in 2026, driven mainly by higher application intensity rather than a sharp rise in fertiliser prices, it said.

In a separate development, the research house said its replanting development is coming to the end of its tenure following the completion of replanting 3,200 hectares last year.

PB plans to replant another 1,000 hectares in 2026 and 1,600 hectares in 2027, with a remaining 200 hectares scheduled for 2028.

Capital expenditure is expected to fall by more than 50 per cent from 2028 onwards, which could lift free cash flow by more than RM180 million per annum.

“Alternatively, the group could spend the money on modernising its harvesting activities, which could further improve its FFB yield and reduce the dependency on foreign workers,” it said.