KUALA LUMPUR (Sept 15): Shares of SD Guthrie Bhd (KL:SDG) have been upgraded to "buy" from "hold" in the near term by Maybank Investment Bank after an "unwarranted" sell-off following Permodalan Nasional Bhd’s (PNB) latest exchangeable sukuk issuance.
The research house said despite recent share price weakness, the plantation group's fundamentals remain intact.
It added that the selldown was largely driven by market overreaction to PNB’s US$300 million (RM1.22 billion) exchangeable sukuk (ES), which has no earnings per share (EPS) impact on SD Guthrie.
SD Guthrie shares increased from RM6.14 on Sept 9, the day PNB announced the exchangeable sukuk, to RM6.34 at time of writing on Tuesday. The latest price values the group at RM43.85 billion.
"With the ES issued last week, we believe concerns over ES potential overhang are over and largely misunderstood," Maybank IB said in a note on Tuesday.
Because the sukuk was issued by PNB rather than SD Guthrie, there will be no new share issuance if investors exercise their options.
Furthermore, there must be a significant price appreciation before conversion rights can be exercised.
Maybank IB estimates SD Guthrie's share price would need to hit at least RM8.66, which is well above current trading levels, before sukuk investors can exchange them for the stock.
"We believe the recent selldown has been unwarranted as nothing has fundamentally changed the past month except for an US$300 million exchangeable sukuk (ES) issued by PNB," Maybank IB added.
The stock upgrade comes as Maybank IB projects SD Guthrie's core net profit to be RM2.9 billion for the financial year ending Dec 31, 2026 (FY2026), which is 5% above the broader market consensus of RM2.76 billion.
However, long-term consensus expectations lean higher than the research house's forecasts.
According to Bloomberg data, the broader market sentiment on SD Guthrie remains positive, with 14 out of 18 research houses rating the stock as a "buy", two recommending "hold" and two "outperform" calls.
The Bloomberg consensus 12-month target price stands at RM7.65, a potential upside of 20.9% from current trading levels.
Maybank IB said SD Guthrie's growth would be centred on new business verticals, including industrial park joint developments spanning over 20,000 acres to sustain RM500 million to RM700 million annual income, alongside its goal of developing one gigawatt in large-scale solar projects.
Maybank IB maintained its target price of RM7.10 based on 0.55 times revised net asset value (RNAV).
An interim dividend per share of 11.18 sen declared in its 1HFY2026 results will go ex-date on Oct 20.