KUALA LUMPUR (Nov 25): Sarawak Plantation Bhd (KL:SWKPLNT) is expected to see a strong performance in the fourth quarter ending Dec 31, 2024 (4QFY2024) on the back of rising crude palm oil (CPO) prices and operational improvements, said analysts.

According to Public Investment Bank (PublicInvest), Sarawak Plantation (SPB) has registered core earnings of RM47.3 million for the nine months ended Sept 30, 2024 (9MFY2024), making up only 60% of its full-year expectations and 68% of the consensus.

Despite this, the research firm expects SPB to have a “strong catch-up” in the final quarter on the back of stronger CPO prices.

BIMB Securities shares a similar optimistic outlook for SPB, citing not only stronger CPO prices but also increased production and stable unit production costs.

BIMB forecasts SPB’s production to grow 7% year-on-year in FY2024 and 10% in FY2025.

The research firm raised its FY2024-FY2025 earnings forecasts for SPB by 16%-40%, based on an upward revision of CPO price assumptions to RM4,100 per tonne, higher margin projections and operational adjustments.

Analysts also cited attractive dividend payouts, with a declared second interim dividend per share of 15 sen, translating into an 8.6% yield, bringing total FY2024 dividend per share to 24 sen.  

Following these updates, BIMB upgraded SPB to a 'buy' call, with a revised target price (TP) of RM2.83, up from RM2.16 previously. PublicInvest, meanwhile, reaffirmed its 'outperform' call, with an unchanged TP of RM2.94.

While minimum wage hikes remain a challenge for the plantation sector, analysts expect SPB to mitigate the impact through ongoing operational efficiencies.