KUALA LUMPUR (Aug 12): SD Guthrie Bhd (KL:SDG) slipped in Wednesday trading after a weaker-than-expected quarter at the world’s top palm oil producer by acreage.
Maybank Investment Bank and TA Securities downgraded their recommendations, though a large majority of research houses are urging investors to look past the latest results skewed by disposal gains and other one-off items in anticipation of a seasonally stronger July-December period.
“We expect earnings to pick up from stronger output and higher prices,” in the second half of the year, RHB Research said. The house kept the stock on “buy” and raised its target price to RM8.00.
SD Guthrie declined eight sen or a little over 1% to RM6.83 after charting a new all-time high of RM7.00 on Wednesday.
Shares of SD Guthrie, however, are still up by more than 20% since the start of the year, as concern rises over intensifying heat from the El Niño weather pattern lowering oil palm fruit yields and cutting into the supply of edible oil used in everything from lipstick to soap.
A push for higher blend of palm-based methyl ester in biodiesel on the back of a surge in crude oil prices amid the Middle East war has also lifted prices of crude palm oil (CPO) by 16% year-to-date.
“We expect the upstream segment to benefit from higher CPO prices” in the second half amid supply risks from the current dry spell and potential development of a strong El Niño, said CGS International.
SD Guthrie is also close to its profit target of up to RM700 million from its industrial development business after booking an operating profit of RM689 million in the first six months, the house said, adding that the company could exceed the aim by end-2026, potentially leading to higher dividends.