Sime Darby Plantation aims for higher oil yield
They hold the key to future organic growth given land scarcity, no deforestation commitment and rising cost pressures, according to CGS-CIMB Research.
The initial data from commercial planting in the Dusun Durian estate (coastal) and Diamond Jubilee (inland) have shown promising results, it said.
Dusun Durian recorded superior fresh fruit brunch (FFB) yields with 31.2 tonnes, 34.5 tonnes, 37.7 tonnes per ha for years one-to-three of harvesting.
For Diamond Jubilee, despite low rainfall of below 100mm per month from 2019-2020, the FFB yield harvested was reasonably good, at 15.8 tonnes, 10.2 tonnes, 20.6 tonnes per ha for one to three of harvesting.
The group has plans to double existing oil yields to eight tonnes per ha by 2050, it said.
Sime Darby Plantation has also introduced its next generation GS, predicted to generate 4% higher oil yield than the first generation GS.
GS is not genetically modified but a result of seven years of research and development (R&D) by the group.
GS can deliver oil yield improvements of up to 15% above its Calix600 seeds, with an average of 6.1 tonnes per ha across all environments (Calix600’s yield: 5.3 tonnes per ha) and yield potential above 10 tonnes per ha in the most fertile environments, it said.
The group has a 200-strong R&D team and has invested RM150mil in it.
However, the constraint is the availability of seeds as only about 3,900 ha were planted with GS since 2016.
In 2021, only 1.47 million GS seeds were produced and Sime Darby Plantation expects to double its production by end-2022.
By 2023, Sime Darby Plantation will have sufficient GS seeds for its annual replanting needs in Malaysia.
By 2033, Sime Darby Plantation targets to have 50% of Malaysia’s planted area of about 297,000 ha replanted with GS.
The research house has a “hold’’ call on the stock with a 12-month target price of RM4.42 a share.
CGS-CIMB Research also cited several risk factors for its earnings estimates, price target and rating for Sime Darby Plantation.
The key risks to the palm oil sector and Sime Darby Plantation are weather anomalies resulting in poorer-than-expected output growth, lower-than-expected crude palm oil price achieved and negative policies imposed by import countries.
CGS-CIMB Research also said weaker competing oil prices like soybean and rapeseed as well as sanctions by key customers following audit findings could also pose risks to the business.
It also said unfriendly policies on upstream or downstream segments would sharply lower CPO prices.
, which makes palm biodiesel demand not viable.