KUALA LUMPUR (Aug 20): CIMB Securities has raised its earnings forecast for Genting Plantations Bhd (KL:GENP) after the group ended its first half of the year with above-expectation results.
The house upgraded the company to 'buy', along with a raised sum-of-parts-based target price of RM6.40.
CIMB Securities acknowledged that plantation was the key driver in earnings growth, thanks to a rise in fresh fruit bunch (FFB), an increase in palm kernel prices, as well as lower crude palm oil (CPO) production costs.
Beyond plantations, CIMB Securities also noted that Genting Plantations' property, biotech and downstream operations contributed to the strong earnings growth through seed sales and higher processing volumes and margins.
Genting Plantations’ associated companies also provided a further boost, with Genting Premium Outlet recording high profits.
Subsequently, CIMB Securities has raised its financial year ending Dec 31, 2026 (FY2026) and FY2027 earnings forecasts by 18%, to reflect the recent RM50 per tonne CPO price upgrade for both years, and higher FFB growth output.
FFB production growth guidance also increased to 10% from 5% previously, supported by stronger crop momentum across both Malaysia and Indonesia.
Production is expected to peak in October to November 2026 despite emerging dry conditions due to a predicted super El Niño, and management has reiterated that the climate phenomenon’s impact on fruit production is limited.
“Given the typical lag between moisture stress and FFB yields, we see limited impact on FY2026 production unless dry conditions intensify materially.
“Weather is increasingly a medium-term production risk rather than a threat to the current crop recovery, while the prolonged dryness could also provide additional support to CPO prices,” noted the house.
CIMB Securities noted that fertiliser remains the main cost pressure for the group, with finalised FY2026 procurement prices at 20%-25% higher year-on-year.
Having said that, the house cited the management's expectation of stronger crop volumes to dilute fixed costs and offset higher fertiliser expenses, reducing earnings sensitivity to cost inflation.
At the time of writing on Thursday, Genting Plantations' share price stood at RM5.74.