Malaysia’s palm oil supply has continued to decline for five consecutive months, with the latest stock falling to 1.51 million tonnes in February 2025. This trend is expected to continue in March 2025, driven by lower productivity during the month of Ramadan. With crude palm oil (CPO) prices remaining high at between RM4,500–RM4,600 per tonne, investors are now looking for plantation stocks that can deliver the best returns.
3 Companies to Choose
Based on financial performance and market outlook, there are three companies that are the top picks for investors:
1. Hap Seng Plantations Holdings Bhd
Net profit: RM 161.4 million in FY2024 (+61% YoY)
Advantages: CPO selling price is higher than competitors, although fresh fruit bunch (FFB) yield is expected to be lower in Q1 2025.
Outlook: Expected to continue to record stable profits in H1 2025 with a strategy to sell CPO at a premium price.
2. Sime Darby Plantation Bhd (SD Guthrie)
Net profit: RM1.54 billion in FY2024 (+73% YoY)
Advantages: Strong income from the upstream sector as well as efficient land management for industrial parks and renewable energy projects.
Outlook: The recovery in production in Indonesia will provide additional advantages for this company.
3. Ta Ann Holdings Bhd
Net profit: RM183.64 million in FY2024 (+16% YoY)
Advantages: Has strong financial stability and attractive dividend (6.7% for FY2025).
Prospects: Despite challenges from adverse weather conditions in Sarawak, high CPO prices are expected to support the company's growth.
Risks to alert
While the outlook for the plantation sector looks positive in the short term, there are several risks that could impact the performance of stocks in this sector. One of the main factors is the increase in palm oil supply from Indonesia, which could lead to overstocking and subsequently depress CPO prices in the global market.
Since soybean oil is the primary rival of palm oil in the global vegetable oil market, increased production of soybean oil may also be a threat to the industry. Prices may be under pressure if the supply of soybean oil keeps growing and the demand for palm oil declines. If soybean oil supply continues to increase, demand for palm oil may decrease and this could put pressure on prices.
Additionally, global trade tensions are also a factor to watch. Tariff restrictions and trade wars between major powers such as the United States and China could disrupt the flow of Malaysian palm oil exports to foreign markets.
If trade restrictions are imposed or demand from major importing countries decreases, this could have a negative impact on palm oil prices and plantation company profits. Therefore, investors should examine these factors before making investment decisions in this sector.
Conclusion
While palm oil prices are expected to remain strong in the short term, investors should be careful of external factors that may affect the market. Hap Seng Plantations and SD Guthrie stand out as companies with strong long-term strategies, while Ta Ann offers attractive dividend yields. With global market volatility, smart stock selection is the key to profitable investment returns.
Shahriena Shukri is a journalist covering business and economic news in Malaysia, providing insights on market trends, corporate developments, and financial policies. More about Shahriena Shukri.
